The B.E. Journal of Economic Analysis & Policy
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Political Feasibility of Pension Reforms
1CES, University of Munich, and CESifo, (email)
Citation Information: Topics in Economic Analysis & Policy. Volume 4, Issue 1, ISSN (Online) 1538-0653, DOI: 10.2202/1538-0653.1162, September 2004
- Published Online:
The impending demographic crisis calls for fundamental reforms of old-age security. In a democracy, however, reforms require the support of the majority. A reform that aims at reducing the size of unfunded pension systems is supported by the young and opposed by the old. As long as the young have the majority, this reform is feasible; as soon as society becomes a gerontocracy, there is risk of further expansion.
We determine for Germany, France and Italy the latest point in time at which a majority is in favour of a reform. For this, we calculate for each year the “indifference age” as the age of the cohort that is not affected by the reform and the “median age” as the age of the politically decisive cohort. In Germany, a reform can be democratically enforced until 2012. France becomes a gerontocracy in 2014 and Italy as early as 2006.