Hostname: page-component-78c5997874-mlc7c Total loading time: 0 Render date: 2024-11-05T22:27:47.864Z Has data issue: false hasContentIssue false
  • English
  • Français

The future of Spanish pensions*

Published online by Cambridge University Press:  06 June 2016

JAVIER DÍAZ-GIMÉNEZ  and
JULIÁN DÍAZ-SAAVEDRA
JAVIER DÍAZ-GIMÉNEZ
Affiliation:
IESE Business School, Madrid, Spain (e-mail: [email protected])
JULIÁN DÍAZ-SAAVEDRA
Affiliation:
Department of Economic Theory and History, Universidad de Granada, Granada, Granada, Spain (e-mail: [email protected])
Get access Rights & Permissions [Opens in a new window]

Abstract

We use an overlapping generations model economy with endogenous retirement to study the 2011 and 2013 reforms of the Spanish public pension system. These reforms delay the legal retirement ages, increase the contributivity of the system, and adopt a sustainability factor and a pension revualuation index that effectively transform the Spanish pension system into a defined-contribution pension system. We find that these reforms improve the sustainability of Spanish pensions substantially, and that they limit the tax increases that would have been necessary to finance the pension system deficits. But these results are achieved at the expense of large reductions in the real value of the average pension. This reduction is progressive and, by 2050, the average pension is approximately 30% smaller in real terms than what it would have been under the pension system rules that prevailed in 2010. We also show that these reforms are costly in welfare terms and that households born between 1950 and 1970, young disabled workers who are alive at the time of the reform, and future cohorts bear the highest welfare costs. The substantial reduction of pensions and the high welfare costs that these reforms bring about lead us to conjecture that further reforms lurk in the future of Spanish pensions.

Keywords

C68H55J26Computable general equilibriumsocial security reformretirement
Type
Articles
Information
Journal of Pension Economics & Finance , Volume 16 , Issue 2 , April 2017 , pp. 233 - 265
Copyright
Copyright © Cambridge University Press 2016 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

*

We thank Juan Carlos Conesa for an early version of the code and we thank Fernando Gil and Pablo Rubio Portillo for their research assistance. We are also grateful to the editor and to two anonymous referees for valuable suggestions and comments. Díaz-Giménez gratefully acknowledges the financial support of the Spanish Ministerio de Ciencia y Tecnologa (ECO2012-37742) and of the Centro de Investigaciones Financieras. Díaz-Saavedra gratefully acknowledges the financial support of the Spanish Ministerio de Ciencia y Tecnología (ECO2011-25737).

References

Alonso, J. and Herce, J. A. (2003) Balance del Sistema de Pensiones y Boom Migratorio en España. Proyecciones del Modelo MODPENS de FEDEA a 2050. FEDEA, Working Papers 2003-02.Google Scholar
Argandoña, A., Díaz-Giménez, J., Díaz-Saavedra, J., and Álvarez, B. (2013) El Reparto y la Capitalización en las Pensiones Españolas. Barcelona: Fundación Edad y Vida.Google Scholar
Argimón, I., Botella, M., González, C., and Vegas, R. (2009) Retirement behaviour and retirement incentives in Spain. Banco de España, Documentos de Trabajo, n 0913.Google Scholar
Balmaseda, M., Melguizo, A., and Taguas, D. (2006) Las Reformas Necesarias en el Sistema de Pensiones Contributivas en España. Moneda y Crédito, 222: 313–340.Google Scholar
Boldrin, M. and Jiménez-Martín, S. (2007) Evaluating Spanish pension expenditure under alternative reform scenarios. In Gruber, J. and Wise, A. (eds), Social Security Programs and Retirement Around the World: Fiscal Implications of Reform. Chicago: NBER, University of Chicago Press, pp. 351–441Google Scholar
Boldrin, M., Jiménez, S., and Peracchi, F. (1997) Social security and retirement in Spain. NBER, WP 6136.Google Scholar
Boldrin, M., Conde-Ruiz, J., and Díaz-Giménez, J. (2010) Eppur si Muove! Spain: growing without a model. FEDEA, Working Papers 2010–12.Google Scholar
Budría, S. and Díaz-Giménez, J. (2006) Earnings, income and wealth inequality in Spain: La Encuesta Financiera de las Familias Españolas (EFF). Mimeo.Google Scholar
Calonge, S. and Conesa, J. C. (2003) Progressivity and Effective Income Taxation in Spain: 1990 and 1995. Barcelona: Centre de Recerca en Economia del Benestar.Google Scholar
Castañeda, A., Díaz-Giménez, J., and Ríos-Rull, J. V. (2003) Accounting for the U.S. earnings and wealth inequality. Journal of Political Economy, 4: 818–855.Google Scholar
Conde-Ruiz, I. and Profeta, P. (2007) The redistributive design of social security systems. Economic Journal, 117: 686–712.Google Scholar
Conde-Ruiz, J. I. and González, C. I. (2013) Reforma de Pensiones 2011 en España. Hacienda Pública Española, IEF, 204(1): 9–44.Google Scholar
Díaz-Giménez, J. and Díaz-Saavedra, J. (2006) The demographic and educational transitions and the sustainability of the Spanish pension system. Moneda y Crédito, 222: 223–270.Google Scholar
Díaz-Giménez, J. and Díaz-Saavedra, J. (2009) Delaying retirement in Spain. Review of Economic Dynamics, 12: 147–167.Google Scholar
García Pérez, J. I. and Sánchez-Martín, A. R. (2010) Social security and the job search behavior of workers approaching retirement. FEDEA, Working Papers 2010-26.Google Scholar
González, C., Conde-Ruiz, J., and Boldrin, M. (2009) Immigration and social security in Spain. FEDEA, Documento de Trabajo 2009-26.Google Scholar
Gouveia, M. and Strauss, R. P. (1994) Effective federal individual income tax functions: an exploratory empirical analysis. National Tax Journal, 47(2): 317–339.Google Scholar
Gruber, J. and Wise, D. A. (1999) Social Security and Retirement around the World. Chicago: NBER Books, National Bureau of Economic Research, Inc.Google Scholar
Jiménez-Martín, S. and Sánchez-Martín, A. R. (2006) An evaluation of the life-cycle effects of minimum pensions on retirement behavior: extended version. Universidad Pablo de Olavide, Department of Economics, Working Papers 06.23.Google Scholar
Jimeno, J. (2000) El Sistema de Pensiones Contributivas en España: Cuestiones Básicas y Perspectivas en el Medio Plazo. FEDEA, Working Paper 2000–15.Google Scholar
Rojas, J. A. (2005) Life-cycle earnings, cohort size effects and social security: a quantitative exploration. Journal of Public Economics, 89(2–3): 465–485.Google Scholar
Sánchez-Martín, A. R. (2010) Endogenous retirement and public pension system reform in Spain. Economic Modelling, 27: 336–349.Google Scholar
Sánchez-Martín, A. R. (2014) The automatic adjustment of pension expenditures in Spain: an evaluation of the 2013 pension reform. Banco de España, Documento de Trabajo 1420.Google Scholar