Pension Reforms In France: Impact On Growth And Inter-Generational Redistributive Effects

Abstract

This paper assesses the impact on growth and the inter-generational redistributive effects of some possible pension reforms in France using a dynamic general equilibrium model with overlapping generations. Results suggest that a reform increasing the effective average retirement age by 1.25 years per decade and diminishing the average replacement rate by around 6 percentage points up to 2020 could stabilise social contributions for the youngest, but would gradually foster the poverty rate among pensioners. On the other hand, a reform incorporating a rise in the age of retirement by 1.25 years per decade, unchanged replacement rates and a discretionary increase of all pensions of 2.5 per cent in 2008 would limit the poverty rate among pensioners, but it would weigh down on the growth rate and the welfare of future generations.

A dynamic analysis of the effects on pensioners’ welfare of social security reforms

“…A reform exclusively focused on the increase of years computed for the pension calculation, that is to say, a decrease in the replacement rate, would bring about the most harmful effects in terms of welfare of retired population. This result is also similar to the one presented by Gonand and Legros (2009) .…”

“…From the result obtained, we can conclude that an extension of the effective retirement age would be the most suitable reform to be implemented to harmonize the financial imbalance with the maintenance of the welfare of retired population. This conclusion is similar to the one drawn by Butrica et al (2006) and Gonand and Legros (2009) . A reform exclusively focused on the increase of years computed for the pension calculation, that is to say, a decrease in the replacement rate, would bring about the most harmful effects in terms of welfare of retired population.…”

“…A reform exclusively focused on the increase of years computed for the pension calculation, that is to say, a decrease in the replacement rate, would bring about the most harmful effects in terms of welfare of retired population. This result is also similar to the one presented by Gonand and Legros (2009). The measures put forward by the Spanish administration (a 2-year increase in the retirement age and an increase of 5 computed years for the pension calculation) have a final negative effect on the individual welfare of retired population.…”

“…However, Lachance (2008), by using a life-cycle model, states that this welfare improvement could be lower than estimated if we take into account the cost induced by the working life extension, in terms of less leisure. Gonand and Legros (2009), by using a dynamic general equilibrium model, present different simulations with different combinations of parametric reforms, oriented to balance the pension system in France. In the first scenario, the replacement rate is kept constant and the effective retirement age is delayed.…”

El efecto del desempleo de la Gran Recesión en los pensionistas españoles

“…One of the main consequences of these reforms is the reduction of the replacement ratios provided to pensioners; that is to say, the percentage of the wage restored with the pension benefit. Accordingly, the welfare level enjoyed by the retirees is expected to be also negatively affected after the implementation of these reforms (Butrica et al, 2006;Lachance, 2008;Gonand and Legros, 2009;Pfau, 2006;Sutherland et al, 2008;Peinado and Serrano, 2011, 2014Peinado, 2014).…”