1. ^aMannheim Institute for the Economics of Aging (MEA), Universität Mannheim, Mannheim D-68131, Germany. E-mail: axel@boersch-supan.de
2. ^bNational Bureau of Economic Research (NBER), Cambridge, MA, U.S.A.

Abstract

This paper is motivated by the idea to create, wherever possible, rational mechanisms that adapt pension systems automatically to a changed economic and demographic environment, rather than to leave such adaptations to discretionary high-profile pension reforms, which all too often stir political opposition. The paper delineates the theory behind such rational mechanisms, shows the advantages and limits of "self-stabilizing" pension systems, and compares the Swedish and the German approaches to rule-bound pension policy.