5. The role of public pension systems for the long-term sustainability of public finances in European Welfare States

Christina Benita Wilke, Hamburg Institute of International Economics, This email address is being protected from spambots. You need JavaScript enabled to view it.

Population ageing poses an evident threat to the financial sustainability of pension systems based on a “pay-as-you-go” (PAYG) scheme where contributions by the young directly finance benefits for the old. The combination of low fertility rates and substantial gains in life expectancy lead to an increase in the so-called old age dependency ratio, the ratio of people aged 65 years and above to those of working age (15 to 64 years). In addition, many countries experienced a so-called baby boom in the 1950s and 1960s, followed by a so-called baby bust thereafter so that comparatively large cohorts are followed directly by comparatively small cohorts. This will worsen the ratio even further once the baby-boom cohorts reach retirement age.

At the same time, especially in the aftermath of the financial and economic crisis, public finances are under enormous pressure, with the EU public debt reaching over 80% of GDP. In most European countries, public pension system expenditures compose a crucial part of the government’s budget.  In this stream, we would like to discuss the role public pension systems may play for the long-term sustainability of public finances in European welfare states and debate about possible pension reform options. We invite papers both on the (continental) Bismarck system and the (Anglo-Saxon) Beveridge system as well as any comparative work on this issue.

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