Discussion paper

DP16451 OECD Pension Reform: it is the business cycle, not the demography!

Using a new real-time dataset from Beetsma et al. (2020) containing all pension reform measures in 23 OECD countries between 1970 and 2017, we demonstrate that, in contrast to what one might a priori expect, the timing of pension reform measures coincides with business cycle shocks and not with current or projected demographic shocks. We rationalise this finding using a political-economy model with two-sided adjustment costs to explain a lack of response of pension reform measures to changes in demographic indicators.

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Citation

Beetsma, R and W Romp (eds) (2021), “DP16451 OECD Pension Reform: it is the business cycle, not the demography!”, CEPR Press Discussion Paper No. 16451. https://cepr.org/publications/dp16451