Vulnerability of Social Institutions

Social institutions face many challenges. The recent economic crisis has provided a stress test as ithas left a legacy of high unemployment and high government debt in many countries. It also loweredpotential output and thus the revenue base for social protection schemes. At the same time, ageingand other secular trends raise long-term sustainability issues. The design of social institutionsdetermines their capacity to deal with shocks and trend changes and the way risks are sharedbetween the institutions and their stakeholders. They also circumscribe the scope for automatic ordiscretionary adjustments, when trade-offs between sustainability, adequacy and efficiency arise.This report examines the sustainability of social institutions and their ability to absorb and cope withshort-term shocks and longer-term trends by providing risk sharing and expenditure smoothing,focusing on pension, health care and unemployment insurance schemes.