Evaluating Spanish Pension Expenditure Under Alternative Reform Scenarios

In this paper we evaluate the quantitative impact that a number of alternative reform scenarios may have on the total expenditure for public pensions in Spain. Our quantitative findings can be summarized in two sentences. For all the reforms considered, the financial impact of the mechanical effect (change in benefits) is order of magnitudes larger than the behavioral impact or change in behavior. For the two Spanish reforms, we find once again that their effect on the outstanding liability of the Spanish Social Security System is essentially negligible: Neither the mechanical nor the behavioral effects amount to much for the 1997 reform, and amount to very little for the 2002 amendment