Fostering the contributory nature of the Spanish retirement pension system: an arithmetic micro-simulation exercise using the mcvl
- Autores: Concepció Patxot Cardoner, Guadalupe Souto Nieves, Jaime Villanueva García
- Localización: Papeles de trabajo del Instituto de Estudios Fiscales. Serie economía, ISSN 1578-0252, Nº 21, 2009, págs. 3-35
- Idioma: inglés
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Resumen
This paper analyses the effect of various measures aimed at fostering the contributory nature of retirement pensions in Spain. In so doing, it draws on a sample extracted from a new micro data set –the MCVL– provided by the Social Security Administration. We find that the measures introduced by the 26/1985 and 24/1997 Acts would have reduced the average initial pension of pensioners retiring between 2003 and 2005 and, hence, the system’s overall generosity. First, our simulations show that the increase in the number of past wages considered in the primary insurance amount (BR) from two to fifteen years would cut the average initial pension by slightly more than 16%. The extent to which the effect of this reform depends on the characteristics of retirees is tested. Although some factors are found to be significant in explaining this effect, the overall explanatory power is quite low.
Second, strengthening the link between the pension received and the number of contributory years would only decrease the entry pension by around 1.5%, as this reform only affects a small share of pensioners.
Finally an aggregate measure of the effect on expenditure of the estimated pension reduction is obtained. The overall impact on the sustainability of these measures is a substantial cut in the share of expenditure to GDP starting at 1.03% of GDP in 2005 and reaching 2.47% of GDP in 2050. This could be considered the maximum effect as long as only the direct effect on pension reduction is captured. Further research is needed in order to consider the possible behavioural reactions of agents when choosing their retirement age.
