Pension expenditure determinants: the case of Portugal

• Published in: Public Sector Economics Vol. 47; no. 2; pp. 177 - 203
• Main Authors: Medeiros Garcia, Maria Teresa, Rocha da Silva, André Fernando Rodrigues
• Format: Journal Article Paper
• Language: English
• Published: Zagreb Institute of Public Finance 01.06.2023; Institut za javne financije
• Subjects: Age; ageing; Aging; Beneficiaries; Cost control; Dependency; Error correction & detection; Expenditures; GDP; Gross Domestic Product; Labor productivity; Life expectancy; linear regression analysis; pension expenditure; pension expenditure; ageing; productivity; unemployment; linear regression analysis; Pension funds; Pension plans; Population aging; Privatization; Productivity; Reforms; Retirement income; Securities markets; State budgets; Sustainability; Unemployed people; Unemployment; Variables; United States > US; Portugal
• ISSN: 2459-8860; 2459-8860
• DOI: 10.3326/pse.47.2.2

Assessing pension expenditure determinants is crucial for the sustainability of public finances. This study aims to disentangle the impact of demographic and economic variables, such as ageing, productivity, and unemployment, on pension expenditure in Portugal. With the use of time-series data, from 1975 to 2014, statistical evidence was found of co-integration between unemployed people aged between 15 and 64 years old, apparent productivity of labour, the old age dependency ratio and pension expenditure as a share of gross domestic product. The use of a vector error correction model, with impulse-response functions and variance decomposition, showed that ageing has an almost insignificant impact in the longrun, when compared with unemployment and productivity.