Scandinavian Working Papers in Economics

Working Papers,
Lund University, Department of Economics

No 2005:35: Political economy and pensions in ageing societies – a note on how an ”impossible” reform was implemented in Sweden.

Agneta Kruse ()
Additional contact information
Agneta Kruse: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden

Abstract: Ageing puts a strain on most countries’ pension systems; forecasts show them to be more or less unsustainable. Evidence from social choice research, theoretical as well as empirical, does not seem to offer a way out of the dilemma, as the median voter will resist a reform. Despite this, Sweden has implemented a major reform, supposedly making the system sustainable. The question in this paper is thus: how was it possible to launch such a reform in Sweden? The analysis is based on majority voting models. Important explanatory factors are age structure as well as the age of the median voter; both of these go against the probability of a reform. A focus on age structure in combination with transitional rules and specific features of the reform may provide an explanation.

Keywords: political economy; pension reform; median voter; age structure

JEL-codes: D72; H55; J26

16 pages, June 7, 2005

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