Abstract. Population ageing generates problems of financial sustainability for unfunded pension systems in many developed countries. Immigration is often presented as one potential solution to this problem, mainly in countries with high migration inflows. The authors propose a model to analyse the impact of immigration flows on the financial sustainability of the pay‐as‐you‐go method, using Spain as a test case. They show that, despite their size, these inflows do not solve the Spanish pension system's sustainability problem, leading to the need for parametric reforms. The article also presents the intensity of the reforms required to maintain the system's financial equilibrium.

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The literature on fiscal policies is paying increasing attention to the impact of the composition of public expenditures on long‐term economic growth. Public policy endogenous growth models recommend to change the composition of public expenditures to items considered productive expenditures. In this sense, European institutions are encouraging the rise in the share of productive outlays like public investments, R&D, and active labor market policies, among others. The article analyzes whether these recommendations are followed by European Union countries and whether a convergence to a new pattern of public finances with a higher share of those items considered productive expenditures by European institutions is arising.

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