Designing benefit rules for flexible retirement: actuarial fairness versus efficiency

• Authors: Simonovits A.
• Languages of publication: HU

Abstracts

EN

Diamond and Mirrlees (1978), considering disability retirement under conditions of asymmetric information, determined the socially optimal, incentive-compatible benefit-retirement age scheme that does not follow traditional actuarial fairness. Eso and Simonovits (2002) did the same for flexible old-age retirement. In the latter model, individuals (types) have private information about their expected life spans. The government's goal is to design a pension system (a function relating benefits to retirement age) that maximizes a social-welfare function and satisfies the social budget constraint and incentive compatibility constraints: a second-best redistributive solution. This paper replaces the social constraint by type-specific ones and determines the fair second-best solution. The fair solution is, however, frequently inefficient, because it is often Pareto-dominated by the redistributive one.

Keywords

EN

PENSION INSURANCE; RETIREMENT SCHEMES; SOCIAL SECURITY

Discipline

• ECONOMICS: ECONOMICS

• Publisher: Committee for Economic Sciences of the Hungarian Academy of Sciences
• Journal: Kozgazdasagi Szemle (Economic Review)
• Year: 2004
• Volume: 51
• Issue: 12
• Pages: 1101-1112
• Document type: ARTICLE

Contributors

author

Simonovits A.

• A. Simonovits, no address given, contact the journal editor

Identifiers

CEJSH db identifier

06HUAAAA00661665