Turning to pension reforms, their short-term direct budgetary impact depends crucially on the
elements touched upon by the reform and on how the reform is designed. Parametric reforms in
government pension schemes that reduce the generosity of the system are likely to exert a direct
positive impact on budgets. This is generally the case of reforms increasing pension contributions,
revising the criteria for the determination of pension benefits (e.g., modifying the indexation
criterion of pensions), tightening the entitlement criteria for pensions, or increasing the statutory
retirement age. As illustrated previously, systemic reforms may have instead a temporary negative
impact on budgets even when having a possible long-term impact on public finances if they imply
the shifting of social contributions into pension schemes privately run or classified outside the
government. It should also be taken into account that the short-term budgetary impact of pension
reforms could be affected to a relevant extent by the fact that reforms are quite often designed in
such a way to take effect gradually. Table 5 compares average changes in primary CABs and
selected budgetary items in periods with and without reforms. Results show that, in spite of a non-
significant difference in the changes in the primary CAB between periods with and without
reforms, there is a statistically significant difference in the short term dynamics of social benefits,
which on average rise in periods without reforms, while falling immediately after the
implementation of reforms.36 The difference in the change in social contributions in reform and
“non-reform” years appears instead negligible.
Since the short-term budgetary impact of pension reforms could be quite different depending on
the specific reforms considered, it could be helpful a close look at budgetary variables of interest
in the years before during and after each one of selected structural pension reforms. Of course,
such an analysis would not be very informative on the impact of reforms on budgets (since there is
no counterfactual for judge what would have been the evolution of budgetary variables without the
reform) but could help to shed light on whether there are systematic differences in the evolution of
reforms depending upon the type of reforms considered. The reforms included in the analysis are
all those reducing overall the generosity of the system and classified as structural in the FRDB
database, i.e., reforms applying to the whole population and not only to particular categories.
Table 6 reports the value (as a percent of GDP) of the primary CAB, social security contribution
and social benefits other than in kind in the year before, during and in the two years after each
reform. Almost all the reforms considered were mainly of the parametric type, aimed at modifying
36 The ESA95 item social benefits other than in kind (D.62), comprises 4 sub-items: social security benefits in cash
(D.621), private funded social benefits (D.622), unfunded employee social benefits (D.623), social assistance
benefits in cash (D.624). Pension reforms are likely to affect especially the first two categories, that on average
constitute about 2/3 of the aggregate social benefits other than in kind in the EU-15 in the past 10 years.
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