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Volatility of Social Security Wealth: Political Risks of Benefit-Rule Changes in Germany

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We address the question of how the generosity of the German public pension systems' benefit rule has changed during the past three decades. In order to do so, we firstly outline the social security reforms of the past 50 years. Then, we illustrate political risk by measuring the volatility of social security wealth induced by the legislative benefit rule changes. Our results show that the standard deviation resulting in the scenarios and cohorts considered is well over 10%. Furthermore, it turns out that the gross social security wealth can be subject to losses between 30% and 60% over the life cycle.
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Keywords: GERMANY; POLITICAL RISK; SOCIAL SECURITY WEALTH

Document Type: Research Article

Publication date: 01 March 2007

More about this publication?
  • As one of the world's oldest professional journals in public finance, founded in 1884, FinanzArchiv (FA) publishes original work from all fields of public economics which are of interest to an international readership, e.g. taxation, public debt, public goods, public choice, federalism, market failure, social policy, and the welfare state. Special emphasis is on high-quality theoretical and empirical papers on current policy issues.

    FA is a peer-reviewed journal commited to a prompt turnaround of submissions.

    FA is listed in the Social Science Citation Index (SSCI), in Current Contents/Social and Behavioral Sciences, in Econ Lit, in the Journal of Economic Literature, in IDEAS and RePEc and in the International Bibliography of the Social Sciences.

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