Beyond the Toledo Agreement: The Intergenerational Impact of the Spanish Pension Reform

31 Pages Posted: 8 Oct 1999

See all articles by Holger Bonin

Holger Bonin

IZA Institute of Labor Economics; ZEW – Leibniz Centre for European Economic Research

Joan Gil

University of Barcelona - Department of Economic Theory

Concepcio Patxot

University of Barcelona - Department of Economic Theory

Date Written: August 1999

Abstract

The paper investigates the intergenerational impact of the Spanish public pension system after the 1997 Pension Reform Act. Using a Generational Accounting framework we find that maintaining the new legal setting could leave future generations with liabilities as high as 176 percent of base year GDP. As the recent reform measures have been insufficient to achieve sustainability of the current pension system, we also analyse the impact of alternative reform strategies. Within the current pay-as-you-go setting, a further improvement of the tax-benefit linkage in the original spirit of the Toledo Agreement is shown to yield the intergenerationally most balanced outcome, compared to an increase in retirement age or an expansion of public subsidies financed through indirect taxes. Finally, we investigate the generational impact of a move toward a partially funded pension system which could restore the intergenerational balance.

JEL Classification: E62, H55

Suggested Citation

Bonin, Holger and Gil Trasfí, Joan and Patxot Cardoner, Concepcio, Beyond the Toledo Agreement: The Intergenerational Impact of the Spanish Pension Reform (August 1999). Available at SSRN: https://ssrn.com/abstract=173020 or http://dx.doi.org/10.2139/ssrn.173020

Holger Bonin

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany
+49 228 3894 303 (Phone)
+49 228 3894 510 (Fax)

ZEW – Leibniz Centre for European Economic Research

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

Joan Gil Trasfí (Contact Author)

University of Barcelona - Department of Economic Theory ( email )

Barcelona
Spain
+34-93-402-4333 (Phone)
+34-93-402-1937 (Fax)

Concepcio Patxot Cardoner

University of Barcelona - Department of Economic Theory ( email )

Barcelona
Spain

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