Growth and welfare distribution in an Ageing society: An applied general equilibrium analysis for the Netherlands

This paper studies the effects of the imminent ageing of the population on economic growth and the distribution of welfare in the Netherlands. It shows that in the current system of social security ageing leads to a considerable welfare loss for future generations. It discusses the effect of reform measures in the pay-as-you-go social security system. It shows that a cut in PAYG pensions is efficiency-improving, but hurts the lower income groups of current generations. This effect can be ameliorated by a debt-financed cut in indirect taxes. In that case the negative welfare effect of the reform for current generations is smaller than the redistribution caused by the demographic shift itself.