Designing a linear pension scheme with forced savings and wage heterogeneity |
| |
Authors: | Helmuth Cremer Philippe De Donder Dario Maldonado Pierre Pestieau |
| |
Institution: | (1) GREMAQ and IDEI, University of Toulouse, Toulouse, France;(2) Universidad del Rosario, Bogota, Colombia;(3) University of Liège, CORE, PSE and CEPR, Liege, Belgium |
| |
Abstract: | This paper studies the optimal linear pension scheme when society consists of rational and myopic individuals. Myopic individuals
have, ex ante, a strong preference for the present even though, ex post, they would regret not to have saved enough. While
rational and myopic persons share the same ex post intertemporal preferences, only the rational agents make their savings
and labor supply decisions according to these preferences. Individuals are also distinguished by their productivity. The social
objective is “paternalistic”: the utilitarian welfare function depends on ex post utilities. We examine how the presence of
myopic individuals affects both the size of the pension system and the degree of redistribution it operates, with and without
liquidity constraints. The relationship between proportion of myopic individuals and characteristics of the pension system
turns out to be much more complex than one would have conjectured. Neither the impact on the level of pensions nor the effect
on their redistributive degree is unambiguous. Nevertheless, we show that under some plausible assumptions adding myopic individuals
increases the level of pension benefits and leads to a shift from a flat or even targeted scheme to a partially contributory
one. However, we also provide an example where the degree of redistribution is not a monotonic function of the proportion
of myopic individuals.
|
| |
Keywords: | Social security Myopia Dual-self model |
本文献已被 SpringerLink 等数据库收录! |
|