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Forced Saving, Redistribution, and Nonlinear Social Security Schemes

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Author Info
Helmuth Cremer () (Toulouse School of Economics (GREMAQ, IDEI, and Institut Universitaire de France), 31000 Toulouse, France)
Philippe De Donder (Toulouse School of Economics (GREMAQ-CNRS and IDEI), 31000 Toulouse, France.)
Dario Maldonado (Department of Economics and CeiBA-Complejidad, Universidad del Rosario, Bogota´, Colombia.)
Pierre Pestieau (CREPP, HEC-Management School, University of Liege; CORE, Universite´ Catholique de Louvain; PSE and CEPR)

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Abstract

This paper studies the design of nonlinear social security schemes when individuals differ in productivity and in their degree of myopia. Myopic individuals may not save ‘‘enough’’ for their retirement. The welfare function is paternalistic: The rate of time preference of the farsighted is used for both types. We show that the solution does not necessarily imply forced savings for the myopics: Paternalistic considerations are mitigated by incentive effects. Numerical results suggest that as the proportion of myopic individuals increases, there is less redistribution and more forced saving, and the desirability of social security increases.

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Publisher Info
Article provided by Southern Economic Association in its journal Southern Economic Journal.

Volume (Year): 76 (2009)
Issue (Month): 1 (July)
Pages: 86-98
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Handle: RePEc:sej:ancoec:v:76:1:y:2009:p:86-98

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Find related papers by JEL classification:
H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
D91 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Consumer Choice; Life Cycle Models and Saving

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. CREMER, Helmuth & DE DONDER, Philippe & MALDONADO, Dario & PESTIEAU, Pierre, 2006. "Voting over type and generosity of a pension system when some individuals are myopic," CORE Discussion Papers 2006079, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE). [Downloadable!]
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  2. Feldstein, Martin S, 1985. "The Optimal Level of Social Security Benefits," The Quarterly Journal of Economics, MIT Press, vol. 100(2), pages 303-20, May. [Downloadable!] (restricted)
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  3. Diamond, Peter & Koszegi, Botond, 2003. "Quasi-hyperbolic discounting and retirement," Journal of Public Economics, Elsevier, vol. 87(9-10), pages 1839-1872, September. [Downloadable!] (restricted)
  4. Cremer, Helmuth & Pestieau, Pierre & Rochet, Jean-Charles, 2003. "Capital income taxation when inherited wealth is not observable," Journal of Public Economics, Elsevier, vol. 87(11), pages 2475-2490, October. [Downloadable!] (restricted)
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  5. Cremer, Helmuth & De Donder, Philippe & Maldonado, Darío & Pestieau, Pierre, 2006. "Designing a Linear Pension Scheme with Forced Savings and Wage Heterogeneity," CEPR Discussion Papers 5914, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  6. Ayse Imrohoroglu & Selahattin Imrohoroglu & Douglas H. Joines, 2000. "Time inconsistent preferences and Social Security," Discussion Paper / Institute for Empirical Macroeconomics 136, Federal Reserve Bank of Minneapolis. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Kerstin Roeder, 2009. "Optimal taxes and pensions in a society with myopic agents," Working Papers 2009/28, Institut d'Economia de Barcelona (IEB). [Downloadable!]
  2. Torben Andersen & Joydeep Bhattacharya, 2008. "On Myopia as Rationale for Social Security," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  3. Helmuth Cremer & Philippe Donder & Dario Maldonado & Pierre Pestieau, 2008. "Designing a linear pension scheme with forced savings and wage heterogeneity," International Tax and Public Finance, Springer, vol. 15(5), pages 547-562, October. [Downloadable!] (restricted)
    Other versions:
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This page was last updated on 2009-12-30.

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