Sixth issue of Gentse Economische Inzichten


Today the sixth issue of Gentse Economische Inzichten (Ghent University Economic Insights) has been published. Gentse Economische Inzichten is a forum for the broad societal dissemination of research findings and policy recommendations by researchers of the Department of Economics of Ghent University. Given that this forum focusses on the Flemish community, the Gentse Economische Inzichten are published in Dutch.

In this issue, based on recent peer-reviewed scientific research, we discuss pension reform: how to reconcile financial sustainability, macroeconomic efficiency and fairness?.

These are the most important insights:

  1. A successful reform of the public pension system promotes in addition to the financial sustainability of the system, also macroeconomic efficiency (employment, labour productivity, economic growth) and social fairness.
  2. A reform that pursues financial sustainability through a reduction of pension benefits fails on the criteria of efficiency and fairness. A reform consisting merely of raising the retirement age promotes financial sustainability and macroeconomic efficiency, but also fails on the criterion of social fairness. Moreover, even better results are possible from a macroeconomic point of view.
  3. Our research results argue for a reform that combines an increase of the retirement age combines with a strong, but intelligent link between the pension benefit and earlier own earned labour income. First, this reform conditions pension benefits on past individual labour income, with a high/rising weight on labour income earned when older and a low weight on labour income earned when young. Second, this linkage is complemented by a strong rise in the benefit replacement rate for low ability individuals (and a reduction for high ability individuals). That approach promotes social fairness and preserves the incentive to work.

Read the full sixth issue of Gentse Economische Inzichtenpdf