Unintended Labor Marked Effects of Sweden's Self-Correcting Pay-As-You-Go Public Pension System

Project manager: Alexander L.P. Willén

Project duration: 01.01.2019 - 01.01.2022

PROJECT DETAILS:

Population ageing threatens the financial stability of existing pay-as-you-go (PAYG) pension schemes. In response, governments across the globe have pursued extensive pension reforms. These reforms might have important (intended and unintended) implications for the affected individuals.

The goal of this project is to investigate the labor market effects of a key feature of Sweden’s reformed pension system – the Automatic Balancing Mechanism (ABM) – which guarantees the solvency of the PAYG scheme by tying benefits to the ratio of assets to liabilities in the system. First, we analyze how the ABM affects individuals' labor market decisions. Second, we evaluate how the balancing principle affects regional economic development.

This project serves as an important tool for understanding how automatic balancing mechanisms in public pension schemes interact with the labor market, and shedding light on this question is fundamental for guiding future pension policy.