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Roman Bartnik and Frank Micheel (2005)

Public Pension Systems in Transition – Structures, Problems and Options for Reform in Germany and Japan*

In: Zeitschrift für Bevölkerungswissenschaft, Vol. 30, 2-3/2005, p. 245-278, Wiesbaden: VS Verlag für Sozialwissenschaften, ISSN: 0340-2398

Gloomy predictions of financial crisis have come to characterise discussions of public old-age pensions in both Germany and Japan. This paper compares the public pay-as-you-go pension systems of both countries. Which factors determine the future evolution of contributions and benefits? As a starting point, the basic trade-offs inherent in pay-as-you-go systems are deduced. Aspects of changing age structures in both countries are compared and their effects on the systems' funding and the size of benefits are analysed. Extrapolation of demographic and economic key figures leads to forecasts on the developments of contributions until about 2040. The scope of plausible reform options is limited in both countries due to path dependencies and the constraints resulting from a changing demographic and economic framework. Discussion and implementation efforts of such reform options in both countries are outlined. Current reforms of the Japanese and German public pension system are analysed according to their effects on three criteria: social redistribution, inter-generational distribution and the systems' long-term financial stability. In sum, both countries face the same basic problem of growing financial strains on the pay-as-you-go systems. Immigration or productivity gains seem to be strongly limited means to ease these pressures. However, possible solutions such as an increasing of the mandatory retirement age, linking of benefits to economic and demographic developments, decoupling of wages and contributions and the use of tax-funded subsidies for basic insurance are in different stages of discussion and implementation in both countries. Thus, a comparison of the evolution of the Japanese and German system leads to insights on the trade-offs inherent to the implementation process that can be used in the other country respectively.

* Original title: Öffentliche Alterssicherung im Umbruch – Strukturen, Problemfelder und aktuelle Reformansätze in Deutschland und Japan (full text in German only)

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