NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

When Will the Germans Get Trapped in their Pension System?

Hans-Werner Sinn, Silke Uebelmesser

NBER Working Paper No. 8503
Issued in October 2001
NBER Program(s):   AG   PE

The upcoming demographic crisis in Germany demands fundamental reforms of the pension system. In a democracy, reforms are, however, only feasible when they are supported by the majority of the electorate. To determine whether the majority is in favor of reforms of the pension system, we calculate for each year the 'indifference age' as the age of the cohort which is not affected by the reform and the 'median age' as the age of the politically decisive cohort. Until 2023, the median age is below the indifference age implying that the young have the majority and the reform can be democratically enforced. After 2023, Germany will be characterized by a gerontocratic system where the old decide over the young. Only the fear that the young might emigrate and perhaps a certain altruistic attitude towards their own descendants will prevent the old from exploiting the young.

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Document Object Identifier (DOI): 10.3386/w8503

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