What drives pension reform measures in the OECD? Evidence based on a New Comprehensive Dataset and Theory

Abstract: Using a unique narratively-constructed dataset of pension reform measures of the OECD countries since the 1970s, we explore the determinants of the timing of those measures based on information available when they are legislated. We distinguish expansionary, contractionary and combined reform regimes. The role of demographic projections is limited to that of the OECD-wide projected old-age dependency ratio in explaining the trend reduction in expansionary and trend increase in contractionary and combined reform measures. Business cycle indicators play a larger role: a worsening makes contractionary and combination regimes more likely and expansionary regimes less likely. A simple theoretical model with an adjustment cost of changing the pension arrangement can account for reform responsiveness to the business cycle.