Research Paper 17: Generation check 2021: Update against the backdrop of the coronavirus pandemic

The "Generation Check" model is based on the methodology of a generation account model. It is used to analyze the long-term effects of changes to the legal framework in Germany in order to identify and derive any need for action to ensure sustainable public finances. The model was developed by Johannes Berger and Ludwig Strohner from EcoAustria together with experts from IW Köln. Generational account models are generally not the same as short-term economic forecasting models. The generation check is also based on assumptions about future trends.

The generation check was published for the first time in 2019 on the basis of the data available at that time and takes into account the political framework conditions of that year, including all reforms that had come into force or been adopted by that time. However, the outbreak of the coronavirus pandemic, the associated lockdown in 2020, the impact on global trade and the partial lockdown that is still ongoing in some sectors led to a severe recession after a ten-year growth phase. For this reason, the generation check was also comprehensively updated in order to be able to include the effects of this recession in the simulations. Not only were the applicable political framework conditions up to and including the first quarter of 2021 taken into account, but all data and forecasts available up to this point were also used.

EcoAustria Research Paper 17 describes the updates to the Generation Check. The central methodology of the model has not been changed. For this reason, it is not presented again in detail.

At the IW Cologne, the generation check is used on an ongoing basis to analyze the sustainability of public finances. A current report examines the intergenerational balance in pensions, for example. The calculations suggest that the public expenditure ratio in Germany will increase noticeably in the medium and long term due to demographic ageing. An increase in the revenue ratio is also projected, particularly due to a significant rise in the pension insurance contribution rate.