DP6993 Voting on Parametric Reforms of the Pay-As-You-Go Pension System

Author(s): João Luis Brasil Gondim, Georges Casamatta
Publication Date: October 2008
Keyword(s): fertility shock, parametric reforms, Pay-As-You-Go
JEL(s): D72, H55
Programme Areas: Public Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=6993

We assess the political support for parametric reforms of the Pay-As-You-Go pension system following a downward fertility shock. Using a continuous time overlapping generations model, we show that, for a large class of utility functions, the majority of the population favor a cut in pension benefits over an increase in the contribution rate. Our framework also allows us to evaluate the political support for raising the retirement age and to determine how the timing of the different reforms affect their political support.