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Public Pension Reforms and Fiscal Foresight: Narrative Evidence and Aggregate Implications
We explore the evolution of pension policy across countries and investigate the macroeconomic effects of pension structural reforms in recent decades, in particular those with implementation delays. We first document chronological changes in pension policy for 10 OECD countries between 1962 and 2017. The new data set shows that pension systems rapidly expanded between the 1960s and 1980s, followed by a wave of retrenchments since the 1990s. Structural pension reforms, which are motivated by long-run fiscal sustainability concerns, often come with significant implementation delays. We find ...
Fiscal Foresight and Real Distortions to Firm Behavior: Anticipatory Dips and Compensating Rebounds
We study the conditions under which fiscal foresight – forward-looking agents anticipating future policy changes – distorts economic behavior through undesired intertemporal tradeoffs. Somewhat surprisingly, fiscal foresight is far from sufficient for policy and incentives to perversely affect firm behavior. Three necessary conditions are identified for distorting behavior: storable output, diminishing returns, and a non-competitive output market. These conditions suggest that the estimated impacts of fiscal policies may be sensitive to underlying economic characteristics and that ...