Postponing Retirement: The Political Push of Aging

26 Pages Posted: 27 Sep 2006

See all articles by Vincenzo Galasso

Vincenzo Galasso

Centre for Economic Policy Research (CEPR); Bocconi University; University of Bocconi - Innocenzo Gasparini Institute for Economic Research (IGIER); CESifo (Center for Economic Studies and Ifo Institute); Bocconi University - Baffi Carefin Centre

Date Written: August 2006

Abstract

Conventional economic wisdom suggests because of the aging process, social security systems will have to be retrenched. In particular, retirement age will have to be largely increased. Yet, is this policy measure feasible in OECD countries? Since the answer belongs mainly to the realm of politics, I evaluate the political feasibility of postponing retirement under aging in France, Italy, the UK, and the US. Simulations for the year 2050 steady state demographic, economic and political scenario suggest that retirement age will be postponed in all countries, while the social security contribution rate will rise in all countries, but Italy. The political support for increasing the retirement age stems mainly from the negative income effect induced by aging, which reduces the profitability of the existing social security system, and thus the individuals net social security wealth.

Keywords: Political equilibria, aging, postponing retirement

JEL Classification: D72, H5, H53

Suggested Citation

Galasso, Vincenzo and Galasso, Vincenzo, Postponing Retirement: The Political Push of Aging (August 2006). CEPR Discussion Paper No. 5777, Available at SSRN: https://ssrn.com/abstract=933099

Vincenzo Galasso (Contact Author)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Bocconi University ( email )

Via Roetgen 1
20136 Milan, MI 20136
Italy

University of Bocconi - Innocenzo Gasparini Institute for Economic Research (IGIER)

Via Roentgen 1
Milan, 20136
Italy
+39 02 5836 5319 (Phone)
+39 02 5836 5318 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Bocconi University - Baffi Carefin Centre ( email )

Via Roentgen 1
Milan
Italy

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