Redistributive effects of different pension systems when longevity varies by socioeconomic status

Sanchez-Romero M, Lee RD, & Fürnkranz-Prskawetz A (2020). Redistributive effects of different pension systems when longevity varies by socioeconomic status. The Journal of the Economics of Ageing 17: e100259. DOI:10.1016/j.jeoa.2020.100259.

[img]
Preview
Text
SRLP_JEOA02.pdf - Accepted Version
Available under License Creative Commons Attribution Non-commercial No Derivatives.

Download (579kB) | Preview
Project: Ageing Europe: An application of National Transfer Accounts (NTA) for explaining and projecting trends in public (AGENTA, FP7 613247)

Abstract

We propose a general analytical framework to model the redistributive features of alternative pension systems when individuals face ex ante differences in mortality. Differences in life expectancy between high and low socioeconomic groups are often large and have widened recently in many countries. Such longevity gaps affect the actuarial fairness and progressivity of public pension systems. However, behavioral responses to longevity and policy complicate analysis of possible reforms. Here we consider how various pension systems would perform in an OLG setting with heterogeneous longevity and ability. We evaluate redistributive effects of three Notional Defined Contribution plans and three Defined Benefit plans, calibrated on the US case. Compared to a benchmark non-redistributive plan that accounts for differences in mortality, US Social Security reduces regressivity from longevity differences, but would require group-specific life tables to achieve progressivity. Moreover, without separate life tables, despite apparent accounting gains, lower income groups would suffer welfare losses and higher income groups would enjoy welfare gains through indirect effects of pension systems on labor supply.

Item Type: Article
Research Programs: World Population (POP)
Depositing User: Luke Kirwan
Date Deposited: 13 May 2020 10:59
Last Modified: 13 May 2020 12:09
URI: http://pure.iiasa.ac.at/16468

Actions (login required)

View Item View Item

International Institute for Applied Systems Analysis (IIASA)
Schlossplatz 1, A-2361 Laxenburg, Austria
Phone: (+43 2236) 807 0 Fax:(+43 2236) 71 313