Comparison of the Factors to Affect Pension Costs among the High-Income Countries

Hideaki Nakamura, University of California, Berkeley

Currently, most of the high-income countries face the problem of increasing pension costs due to population aging. Pension expenditures as a fraction of GDP are 4.4% in U.S., 7.9% in Japan, 11.8% in Germany, and 14.2% in Italy (OECD, 2001). Thus, among these countries, pension costs vary widely. Why are pension costs different among these high-income countries? What are the main factors of the difference in pension costs? How will they change in the future? Early retirement behavior, replacement rate and the proportion of people aged 65 and over would surely be the main factors to increase the pension costs. Are there any other factors to affect pension costs? In this paper, I will consider the factors to affect pension costs among high-income countries, and find out differences among those countries.