Forum for Science, Industry and Business

Sponsored by:     3M 
Search our Site:

 

The Netherlands bears part of the costs of ageing in other EU countries

28.05.2008
Countries in the European Union with fully funded pension schemes, such as the Netherlands, will in the long term bear part of the burden of an ageing population in countries operating a pay-as-you-go (PAYG) system.

The ‘fully funded countries’ will eventually share in the costs of ageing in the ‘PAYG countries’, particularly if these countries are using government debt to finance the long-term costs of ageing. This is the conclusion of the Dutch economist Yvonne Adema in the thesis she will be defending at Tilburg University, the Netherlands, on 30 May. She also recommends that decisions on pension reforms should be made at the European level.

During the next few decades, many western countries will be confronted with an ageing population. However, the economic effects will vary from country to country. Yvonne Adema has carried out pioneering scientific research into how countries operating different pension systems, and therefore showing different saving reactions to this phenomenon, influence each other via capital markets. The various member states will inevitably feel the consequences of the way in which other countries have organized their pension systems or the pension reforms implemented in response to the problem of ageing. The effects will particularly be felt in Europe, where the countries using the Euro already have a fully integrated capital market.

Countries like the Netherlands with an extensive fully funded pension system, whereby people save for their retirement, will ultimately be faced with the problems of the countries in the Economic and Monetary Union (EMU) that operate a PAYG system. According to Adema’s analysis, this is because the savings in ‘fully funded countries’ rise more steeply in response to ageing than in countries with a PAYG system such as Italy and Germany. On balance, the result will be a capital flow into these latter countries. Moreover, the cost of pensions in ‘PAYG countries’, where the working population finances the pensions of the older citizens, will rise sharply as the number of pensioners increases relative to the number of people in the workforce. If these countries then use government debt to cover the cost of the ageing population, the 'fully funded countries’ will find themselves facing some of the costs. If the government debt is very high, this can lead to inflation with direct implications for the rest of the common capital market.

According to Adema, it is therefore vital that all countries in the EMU comply with the Stability and Growth Pact. It is also important that the European Central Bank is independent, credible and transparent.

Reform is not always the answer
It is often suggested that the tenability of public PAYG systems can be improved by reforming them and switching to a fully funded system. However, in her thesis Adema shows that this can have negative implications for fully funded countries within the common capital market. The economist is therefore putting forward a case for coordinating or even centralizing the decision-making on pension reform.

Yvonne Adema (1979, Meppel) studied economics at the University of Groningen, the Netherlands (passing cum laude) and conducted her PhD research at the CentER Graduate School in the Faculty of Economics and Business in Tilburg. She specializes in public economics, international and monetary economics. Since October 2007, she has been working as a postdoctoral researcher for the Economics Department at Tilburg University and Netspar, the Network for Studies on Pensions, Aging and Retirement. She is also affiliated to the Netherlands Bureau for Economic Policy Analysis.

Corine Schouten | alfa
Further information:
http://www.tilburguniversity.nl/news/pressreleases

More articles from Business and Finance:

nachricht Mathematical confirmation: Rewiring financial networks reduces systemic risk
22.06.2017 | International Institute for Applied Systems Analysis (IIASA)

nachricht Frugal Innovations: when less is more
19.04.2017 | Fraunhofer-Institut für Arbeitswirtschaft und Organisation IAO

All articles from Business and Finance >>>

The most recent press releases about innovation >>>

Die letzten 5 Focus-News des innovations-reports im Überblick:

Im Focus: Salmonella as a tumour medication

HZI researchers developed a bacterial strain that can be used in cancer therapy

Salmonellae are dangerous pathogens that enter the body via contaminated food and can cause severe infections. But these bacteria are also known to target...

Im Focus: Neutron star merger directly observed for the first time

University of Maryland researchers contribute to historic detection of gravitational waves and light created by event

On August 17, 2017, at 12:41:04 UTC, scientists made the first direct observation of a merger between two neutron stars--the dense, collapsed cores that remain...

Im Focus: Breaking: the first light from two neutron stars merging

Seven new papers describe the first-ever detection of light from a gravitational wave source. The event, caused by two neutron stars colliding and merging together, was dubbed GW170817 because it sent ripples through space-time that reached Earth on 2017 August 17. Around the world, hundreds of excited astronomers mobilized quickly and were able to observe the event using numerous telescopes, providing a wealth of new data.

Previous detections of gravitational waves have all involved the merger of two black holes, a feat that won the 2017 Nobel Prize in Physics earlier this month....

Im Focus: Smart sensors for efficient processes

Material defects in end products can quickly result in failures in many areas of industry, and have a massive impact on the safe use of their products. This is why, in the field of quality assurance, intelligent, nondestructive sensor systems play a key role. They allow testing components and parts in a rapid and cost-efficient manner without destroying the actual product or changing its surface. Experts from the Fraunhofer IZFP in Saarbrücken will be presenting two exhibits at the Blechexpo in Stuttgart from 7–10 November 2017 that allow fast, reliable, and automated characterization of materials and detection of defects (Hall 5, Booth 5306).

When quality testing uses time-consuming destructive test methods, it can result in enormous costs due to damaging or destroying the products. And given that...

Im Focus: Cold molecules on collision course

Using a new cooling technique MPQ scientists succeed at observing collisions in a dense beam of cold and slow dipolar molecules.

How do chemical reactions proceed at extremely low temperatures? The answer requires the investigation of molecular samples that are cold, dense, and slow at...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

Event News

3rd Symposium on Driving Simulation

23.10.2017 | Event News

ASEAN Member States discuss the future role of renewable energy

17.10.2017 | Event News

World Health Summit 2017: International experts set the course for the future of Global Health

10.10.2017 | Event News

 
Latest News

Microfluidics probe 'cholesterol' of the oil industry

23.10.2017 | Life Sciences

Gamma rays will reach beyond the limits of light

23.10.2017 | Physics and Astronomy

The end of pneumonia? New vaccine offers hope

23.10.2017 | Health and Medicine

VideoLinks
B2B-VideoLinks
More VideoLinks >>>