Ageing, Funded Pensions and the Dutch Economy

31 Pages Posted: 16 Feb 2005

See all articles by A. Lans Bovenberg

A. Lans Bovenberg

Tilburg University - Center for Economic Research (CentER); Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute)

Thijs Knaap

Utrecht University - School of Economics

Date Written: February 2005

Abstract

This paper attempts to paint a coherent picture of the effects of ageing on a small, open, economy with large pension funds in different institutional settings. Quantitative scenarios are projected with an applied computable general equilibrium model with institutional details. We find that ageing leads to a tighter labor market, increasing costs for both pension funds and the government, and leaving the economy vulnerable to financial and further demographic shocks. We show that defined benefit pension arrangements can be destabilizing, but less so if an average-wage variable-indexation contract is chosen. Government can help by adopting a policy of tax smoothing, but the single most important determinant of the net burden of ageing is the eventual size of the increase in labor market participation of older workers. The intergenerational welfare effects of demographic shocks and changes in international interest rates are sizable and should be an integral part of the assessment of different policy instruments.

Keywords: ageing, funded pensions, applied general equilibrium models, the Netherlands

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JEL Classification: E17, H30, J18

Suggested Citation

Bovenberg, A. Lans and Knaap, Thijs, Ageing, Funded Pensions and the Dutch Economy (February 2005). Available at SSRN: https://ssrn.com/abstract=667327 or http://dx.doi.org/10.2139/ssrn.667327

A. Lans Bovenberg (Contact Author)

Tilburg University - Center for Economic Research (CentER) ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 466 2912 (Phone)
+31 13 466 3066 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Thijs Knaap

Utrecht University - School of Economics ( email )

Kriekenpitplein 21-22
Adam Smith Building
Utrecht, 3584 EC
Netherlands

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