Paying for pensions: how important is economic growth?
Keywords:Ageing, Demographics, Economic Growth, Expenditure, Growth, Pension, Population, Productivity
This paper focuses on the scope for a higher level of output and faster productivity growth to ease future fiscal pressures stemming from demographic developments in OECD countries over the next fifty years. After concluding that, without substantial reforms, pressure on government spending linked to ageing populations (both on pensions and health expenditures), will in general result in significant increases in expenditures to GDP ratios, the paper examines how these pressures might be redressed. Responses which focus on achieving an increase in the average number of years individuals spend active in the labour force and raising the level as well as widening the sources of individual provision of retirement income are recommended. Increasing output (through lower structural unemployment and higher female and elderly workers' participation rates) and its rate of growth (through gains in productivity) are seen as offering a complementary, though limited, response.
JEL Codes: J14, H55, J26, O47
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