Socioeconomic effects of pension spending: evidence from Spain
International Journal of Social Economics
ISSN: 0306-8293
Article publication date: 5 May 2020
Issue publication date: 8 June 2020
Abstract
Purpose
The purpose of this study is to provide broader understanding of the significant role that the pension system has in the Spanish economy by estimating the sectoral production, employment and income sustained by pensioners' consumption.
Design/methodology/approach
Based on input–output tables by the World Input–Output Database and consumption data from the Household Budget Survey by the Spanish Statistical Office, a demoeconomic model is applied to quantify the direct impacts, indirect impacts from interindustry links and induced impacts from income–consumption connections over a nine-year period (2006–2014). Then, the factors driving the evolution of total output, employment and value added during such period have been examined by using structural decomposition analysis.
Findings
The growing participation of consumption by pensioner households in final demand had proven crucial during the 2008 crisis to alleviate the negative trend in production and employment derived from the collapse in consumption suffered by the rest of households.
Practical implications
Determining the underlying factors driving changes in both employment and income during the 2008 crisis can be of interest in political decision-making on the sustainability of the Spanish pension system.
Social implications
The results of estimating both the employment and income supported by pensioners' consumption reveal the significant stabilizing effect of the public spending on pensions, particularly during the 2008 crisis.
Originality/value
The current Spanish approach of attaining the pension system sustainability by merely reducing social protection costs ignores the adverse consequences of a lower pensioners' demand. This paper addresses an alternative view in which pension spending is not considered a burden on economic growth but rather a means of improving the level of production and employment.
Peer review
The peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-01-2019-0047
Keywords
Acknowledgements
We thank the anonymous referees and editor for helpful and thorough comments. Any errors the article may content are the sole responsability of the authors. The authors would also like to thank Geoffrey Hewings for detailed and useful comments on early drafts of this paper.
Citation
Bermejo, F., Febrero, E. and Fernandes Tomon Avelino, A. (2020), "Socioeconomic effects of pension spending: evidence from Spain", International Journal of Social Economics, Vol. 47 No. 5, pp. 599-617. https://doi.org/10.1108/IJSE-01-2019-0047
Publisher
:Emerald Publishing Limited
Copyright © 2020, Emerald Publishing Limited