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Pension reform, savings behavior, and capital market performance

Published online by Cambridge University Press:  09 May 2005

AXEL H. BÖRSCH-SUPAN
Affiliation:
Mannheim Research Institute for the Economics of Aging (MEA), Department of Economics, University of Mannheim, Germany National Bureau of Economic Research (NBER), Cambridge, Massachusetts (e-mail: [email protected])
F. JENS KÖKE
Affiliation:
Mannheim Research Institute for the Economics of Aging (MEA), Department of Economics, University of Mannheim, Germany
JOACHIM K. WINTER
Affiliation:
Mannheim Research Institute for the Economics of Aging (MEA), Department of Economics, University of Mannheim, Germany Department of Economics, Ludwig-Maximilians-Universität, München, Germany

Abstract

This paper shows that the capital market effects of population aging and pension reform are particularly strong in continental European economies such as France, Germany, and Italy. Reasons are threefold: these countries have large and ailing pay-as-you-go public pension systems, relatively thin capital markets and less than benchmark capital performance. The aging process will force the younger generations in these countries to provide more retirement income through own private saving. Capital markets will therefore grow in size and active institutional investors will become more important as intermediaries. The aim of this paper is to show that these changes are likely to generate beneficial side effects in terms of improved productivity and aggregate growth.

Type
Issues and Policy
Copyright
© 2005 Cambridge University Press

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