VOLUMEN XXVI
OTOÑO 2018



AN ACCOUNTING DECOMPOSITION OF THE NET FINANCIAL BALANCE OF THE PUBLIC PENSION SYSTEM WITH AN APPLICATION TO SPAIN, 1985-2017*

 
ÁNGEL DE LA FUENTE
FEDEA e Instituto de Análisis Económico, CSIC
MIGUEL ÁNGEL GARCÍA DÍAZ
Universidad Rey Juan Carlos y FEDEA
ALFONSO R. SÁNCHEZ
CUNEF y FEDEA
 

We develop an accounting decomposition of the net balance of the public pension system into a series of components that isolate the contributions of demography, the evolution of real wages and employment, the generosity and coverage of the pension system, the average contribution rate on labor income and the average duration of worker's contribution histories. This decomposition is applied to the Spanish public pension system using data for 1985-2017. The more striking finding is that the stagnation of real wages has played a more important role than demographics in the deterioration of the system's finances. The negative effect of these two factors has been partially offset by a rising employment rate, the gradual reduction in the generosity of the pension system and the increasing contribution of the Central Government to the financing of minimum pension complements.

 

Key words: pensions, Spain, wage stagnation.
JEL classification: H55.


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