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Aging and the Financing of Social Security in Switzerland

abstract Demographic projections forecast a doubling of the dependency ratio until 2050 as well as an increase of 10% in population due to longer life expectancy in Switzerland. To quantify the effects on social security and public finances, we use a computational overlapping generations model with five margins of labor supply: labor market participation, hours worked, job search, retirement, and on-the-job training. Starting with a passive fiscal strategy, we find that aging might reduce per capita income by 20 percent and necessitate a long-run increase of wage taxes and social security contributions by 21 percentage points. A comprehensive reform package, including an increase in the effective retirement age to 68 years and several other measures, may limit the tax increases to 4 percentage points of value added tax and reduce the decline of per capita income to less than 6%.

Persistent link: http://EconPapers.repec.org/RePEc:ses:arsjes:2011-ii-3
   
type journal paper
   
keywords Aging, social security, retirement, human capital, unemployment.
   
language English
kind of paper journal article
date of appearance 2-6-2011
journal Swiss Journal of Economics and Statistics
publisher Peter Lang (Bern)
ISSN 0303-9692
volume of journal 147
number of issue 2
page(s) 181-231
review blind review
   
citation Keuschnigg, C., Keuschnigg, M., & Jaag, C. (2011). Aging and the Financing of Social Security in Switzerland. Swiss Journal of Economics and Statistics, 147(2), 181-231.