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How to measure and compare pension expenditures in cross-country analyses? Some methodological remarks

Edyta Marcinkiewicz and Filip Chybalski

In our paper, we discuss pension expenditure as one of the main indicators of pension system sustainability. However, given the large demographic diversity between the European countries, public spending on pensions is hard to compare. We proposed two alternative indicators visualising the level of pension expenditure. The first is the quotient of pension expenditure and GDP and old-age dependency ratio. The second replaces the old-age dependency ratio with the proportion of population aged 65 and over. Such standardisation of the commonly used pension expenditure to GDP indicator makes it possible to provide for the demographic effect and this way it facilitates a comparison of pension expenditures between countries with very different population structures.