• • Identify within an overlapping-generations model how different pension schemes affect individual saving decisions over the life-cycle
• • Understand the economics of population aging and identify the main mechanisms through which pension systems are challenged by demographic changes
• • Compare the welfare and distributional implications of different pension systems
• • Demonstrate a solid understanding of the structure of pension systems from a practical perspective, such as types of pension schemes, the role of pension funds, regulation of the pension sector, etc.
• • Analyze the relationship between the pension system and households’ economic and financial decisions based on Danish and international evidence

In times of rapid population aging, traditional pension systems are increasingly being put under pressure. As a shrinking group of young people faces growing cohorts of retirees, it becomes a key issue to design pension systems that can preserve the living standards of the old without over-burdening the young. So what characterizes a good pension system? How well prepared are current pension systems to address the demographic challenges? And how can they become more resilient and sustainable?

In this course, we will address these questions from an economic perspective and with a focus on the Danish pension system. The Danish pension system is consistently being ranked as one of the best pension systems in the world. It mitigates old-age poverty and generates high living standards in retirement, while at the same time being financially sustainable. Therefore, it offers an ideal example for studying how to optimally design pension systems.

This course consists of two parts. The first part provides an introduction to the theory of pension economics. We will study overlapping-generation models, which are simple and intuitive models in which we can incorporate different types of pension schemes. In particular, we will use these models to compare two prototype pension systems, the pay-as-you-go system and the fully funded system. We will assess theoretically how both types respond to demographic aging.

In the second part of the course, we will study pension systems in practice. We will get familiar with the key features of the Danish pension system and how it came into being. Building on the Danish case, we will consider the pension systems of other countries and derive concrete policy recommendations for making these systems more sustainable.

2-week course that cannot be combined with any other course.