Projecting Pension Expenditures in Spain: On Uncertainty, Communication and Transparency

In this paper we suggest a set of indicators about the future performance of the Spanish public pension system and a suitable method of representing their uncertainty, in order to improve the communication to the public opinion about its main future challenges. Spain seems a particularly interesting case in Europe to illustrate our proposals, since the social security system has been in surplus for nine consecutive years, in sharp contrast to the projections made just a decade ago, but, at the same time, most projections foresee for Spain one of the highest increases in public expenditure among EU countries due to ageing. We argue that simple, transparent, credible, public and periodic indicators, which take explicitly into account the uncertainty about future demographic, economic and institutional developments, may contribute to improve the debate on the policies needed to strengthen the pension system.pensions, projections, communication, uncertainty

Fiscal Rules and Macroeconomic Stability

In this paper we analyze the impact of fiscal rules on the effectiveness of fiscal policy as a macroeconomic stabilizing instrument. First, we review the available evidence on the effects of fiscal policy to affect output in the short run and real interest rates and investment and growth in the long run, and we show how the use of fiscal rules has proved useful in restraining debt and deficits. Secondly, we discuss if debt consolidation rules trade off higher output instability in exchange for lower deficits, using three alternative representations of the intertemporal substitution mechanism in a SDGE framework. Our main conclusion is that both the impact of discretionary fiscal policy and the strength of automatic stabilizers are largely unaffected by the 'tightness' of these rules. Therefore, there is nothing in the design of fiscal rules aimed at preventing huge and long-lasting deviations of debt from the steady state level, which makes them an impediment to fiscal policy carrying out its job as a significant stabilizing policy instrument.fiscal rules,output volatility,automatic stabilizers

Human Capital Inequality, Life Expectancy and Economic Growth

This paper provides a theoretical model in which inequality affects per capita income when individuals decide to accumulate human capital depending on their life expectancy. The model assumes that life expectancy depends to a large extent on the environment in which individuals grow up, in particular, on the human capital of their parents. After calibrating the life expectancy function according to the international evidence for cross-section data, our results show the existence of multiple steady states depending on the initial distribution of education. In particular, human capital may converge towards different stable steady states. In accordance with the evidence displayed by many developing countries, the low steady state is a poverty trap in which children are raised in poor families, have a low life expectancy and work as non-educated workers all their lives.life expectancy, iinequality, human capital accumulation

Human Capital Inequality, Life Expectancy and Economic Growth

This paper presents a model in which inequality affects per capita income when individuals decide to invest in education taking into account their life expectancy, which depends to a large extent on the human capital of their parents. Our results show the existence of multiple steady states depending on the initial distribution of education. The low steady state is a poverty trap in which children raised in poor families have low life expectancy and work as non-educated workers. The empirical evidence suggests that the life expectancy mechanism explains a major part of the relationship between inequality and human capital accumulation.Life expectancy, human capital, inequality.

Price Rigidity and the Volatility of Vacancies and Unemployment

The successful matching model developed by Mortensen and Pissarides seems to find its hardest task in explaining the cyclical movements of some key labor market variables such as the vacancy rate and the vacancy-unemployment ratio. Several authors have discussed mechanisms compatible with the matching technology that are able to deliver the kind of correlations observed in the data. In this paper we explore four such additional mechanisms embedded in a full blown SDGE model. We find that price rigidity greatly improves the model's empirical performance making it capable of reproducing second moments of the data. Other components such as intertemporal substitution, endogenous match destruction, capital accumulation and distortionary taxes also play a relevant role.unemployment, vacancies, business cycle, price rigidities

Fiscal Policy, Macroeconomic Stability and Finite Horizons

In this paper we analyse the stabilisation properties of distortionary taxes in a New Keynesian model with overlapping generations of finitely-lived consumers. In this framework, government debt is part of net wealth and this adds a number of interesting channels through which fiscal policy could affect output and inflation. Output volatility, in presence of technology shocks, is not substantially affected by the operation of automatic stabilisers but we find interesting composition effects. While the presence of finitely-lived households strengthens the stabilisation performance of distortionary taxes through the reduction of the volatility of consumption, it does so at the cost of more volatile investment and real balances. These conflicting responses add up to a very small overall welfare losses associated with distortionary taxation.

Megaregions i benestar a Europa

En aquest article s'ofereix per primer cop una evidencia de la relació entre benestar i megaregions a Europa. Creuant la base de dades de benestar de l'OCDE per als anys 2000 i 2013 amb la definició de les megaregions europees, s'elabora una base de dades sobre benestar a les megaregions europees, que permet donar una primera evidència sobre si els nivells de benestar són majors a les megaregions que fora d'elles, i si el benestar ha millorat o empitjorat a les megaregions entre els anys 2000 i 2013.En este artículo se ofrece por primera vez una evidencia de la relación entre bienestar y megarregiones en Europa. Cruzando la base de datos de bienestar de la OCDE para los años 2000 y 2013 con la definición de las megarregiones europeas, se elabora una base de datos sobre bienestar en las megarregiones europeas, que permite dar una primera evidencia sobre si los niveles de bienestar son mayores en las megarregiones que fuera de ellas, y si el bienestar ha mejorado o empeorado en las megarregiones entre los años 2000 y 2013

Tax Reforms and Labour-market Performance: An Evaluation for Spain using REMS

This paper uses REMS, a Rational Expectations Model of the Spanish economy designed by Boscá et al (2007), to analyse the effects of lowering the overall tax wedge to the level prevailing in the US. Our results partially confirm previous findings in the literature: a reduction in the overall tax wedge of 19.5 points, in order to reach the US levels, has a positive effect in the long run, increasing total hours by about 7 per cent and GDP by about 8 percentage points. In terms of GDP per adult, these results account for 1/4 of the gap with respect to the US, but imply a reduction of only one percentage point in the labour productivity gap. The rise in total hours per adult is explained by a similar increase in both hours per employee and the employment rate of about 3.5 percentage points, allowing hours per adult to converge to levels only slightly lower than those in the US.general equilibrium, tax wedge, tax reforms, fiscal policy, labour market

Potential Growth and Business Cycle in the Spanish Economy: Implications for Fiscal Policy

An accurately estimation of the cyclical position of an economy is a necessary condition for the success of fiscal stabilisation policies. In this paper we show that the estimation of the output gap by means of decomposing a production function produces similar results to univariate and multivariate methods, increasing their robustness and allowing us to conclude that most of the information on the economic cycle is included in the cyclical component of the unemployment rate. The results also indicate that there is reduced uncertainty about the periods when the Spanish economy has clearly been in a deep recession or in a sharp expansion. These periods have been limited and of relatively short duration. Fiscal policy should pay particular attention to these episodes, when discretionary stabilisation policies make most sense.potential growth, business cycle, speed-limit policies

Human capital as a factor of growth and employment at the regional level. The case of Spain

We use statistical techniques to quantify the effects of school attainment on individual wages, participation rates and employment probabilities in Spain, and to measure the contribution of education to labour productivity at the regional level. These estimates are then combined with data on private and public expenditure on education and with information on taxes and social benefits to construct measures of the private and social returns to schooling, to explore the effects of public policies on private incentives to invest in human capital, and to analyse the long-term effects of schooling on public finances. The results are used, together with estimates of the returns to alternative assets, to draw some tentative conclusions regarding the adequacy of the aggregate investment patterns observed in the regions of Spain, and to identify changes in the design of national and EU cohesion and growth policies that may help enhance their effectiveness.human capital, growth, employment, returns to schooling