Designing optimal pension rules: new results

• Authors: Simonovits Andras , Toth Janos
• Languages of publication: HU

Abstracts

EN

This paper follows earlier ones by the same authors in applying mechanism design to finding an optimal non-linear pension-benefit rule for flexible retirement. It is assumed that individuals have private information about their expected life spans. The government's goal is to design a pension system (a payroll tax and a function that relates benefits to length of employment) that maximizes a social-welfare function and satisfies a social budget constraint (without satisfying the individual ones) redistribution. Since individuals with different life expectancies optimize their employment lengths conditionally on the benefit function, the government must also take into account incentive constraints. The authors' former studies reduced the inflexibility of the optimum and the excess in redistribution by rendering the social-welfare function concave. The new findings in this paper are: (1) some redistribution is inevitable in any reasonable pension system, and (2) second-best solutions may be local indeterminate, while (3) returning to utilitarianism, the minimization of redistribution is considered.

Keywords

EN

ASYMMETRIC AND PRIVATE INFORMATION; INTERTEMPORAL CONSUMER CHOICE; LIFE CYCLE MODELS AND SAVING; SOCIAL SECURITY AND PUBLIC PENSIONS

Discipline

• ECONOMICS: ECONOMICS

• Publisher: Committee for Economic Sciences of the Hungarian Academy of Sciences
• Journal: Kozgazdasagi Szemle (Economic Review)
• Year: 2007
• Volume: 54
• Issue: 7/8
• Pages: 628-643
• Document type: ARTICLE

Contributors

author

Simonovits Andras

author

Toth Janos

• Andras Simonovits, no address given, contact the journal editor

Identifiers

CEJSH db identifier

10HUAAAA07852