Controlling the effects of demographic risks: the role of pension indexation schemes

Within a model featuring demographic uncertainty, this paper studies a pension reform where public pension benefits are indexed to the total wage bill rather than to the average wage level. This implies a decline in the variability of contribution rates and an increase in the variability of replacem...

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Bibliographic Details
Published in:Journal of pension economics & finance 2005-07, Vol.4 (2), p.139-153
Main Authors: ALHO, JUHA M., HOUGAARD JENSEN, SVEND E., LASSILA, JUKKA, VALKONEN, TARMO
Format: Article
Language:English
Subjects:
Age
Fertility
Forecasting techniques
Growth rate
Immigration
Labor force
Life expectancy
Pensions
Population
Wages & salaries
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Summary:Within a model featuring demographic uncertainty, this paper studies a pension reform where public pension benefits are indexed to the total wage bill rather than to the average wage level. This implies a decline in the variability of contribution rates and an increase in the variability of replacement rates. While thus shifting some of the adjustment burden following demographic shocks to pensioners, the trade-off in risks is found to be fairly moderate.
ISSN:1474-7472
1475-3022
DOI:10.1017/S1474747205001940