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Social Security and Longevity

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Author Info
Torben Andersen ()
Abstract

Many countries face the problem of how to reform social security systems to cope with increasing life expectancy. This raises questions concerning both distribution and risk sharing across generations. These issues are addressed within an OLG model with stochastic life expectancy across generations and endogenous retirement decisions. The social optimum is shown to imply that retirement age should be proportional to longevity. Moreover, increasing longevity calls for pre-funding even if the utility of all generations is weighted equal to the objective discount rate. The social optimum cannot be decentralized due to a conflict between incentives and risk sharing. The implications of stylized social security systems for risk sharing and retirement incentives are analyzed.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 1577.

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Date of creation: 2005
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Handle: RePEc:ces:ceswps:_1577

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Find related papers by JEL classification:
H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends and Forecasts
J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped
J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy

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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. Woodward, Richard T., 1999. "Sustainability As Intergenerational Fairness," Faculty Paper Series 24014, Texas A&M University, Department of Agricultural Economics. [Downloadable!]
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  3. Padilla, Emilio, 2002. "Intergenerational equity and sustainability," Ecological Economics, Elsevier, vol. 41(1), pages 69-83, April. [Downloadable!] (restricted)
  4. Martin Werding, 2004. "Assessing Old-age Pension Benefits: The Rules Applied In Different Countries," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, vol. 2(2), pages 55-63, 07. [Downloadable!]
  5. Andersen, Torben M & Dogonowski, Robert R, 2002. "Social Insurance and the Public Budget," Economica, London School of Economics and Political Science, vol. 69(275), pages 415-31, August. [Downloadable!] (restricted)
  6. Henning Bohn, 1999. "Social Security and Demographic Uncertainty: The Risk Sharing Properties of Alternative Policies," NBER Working Papers 7030, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Alan J. Auerbach & Kevin A. Hassett, 2002. "Optimal Long-Run Fiscal Policy: Constraints, Preferences and the Resolution of Uncertainty," NBER Working Papers 9132, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. Gabriel Talmain, . "An Analytical Approximate Solution to the Problem of Precautionary Savings," Discussion Papers 98/4, Department of Economics, University of York. [Downloadable!]
  9. Talmain, Gabriel, 1998. "An analytical approximate solution to the problem of precautionary savings," Journal of Economic Dynamics and Control, Elsevier, vol. 23(1), pages 113-124, September. [Downloadable!] (restricted)
  10. Auerbach, Alan J & Hassett, Kevin A, 2002. "Fiscal Policy and Uncertainty," International Finance, Blackwell Publishing, vol. 5(2), pages 229-49, Summer. [Downloadable!] (restricted)
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(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. Torben Andersen, 2006. "Increasing Longevity and Social Security Reforms," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  2. Jukka Lassila & Tarmo Valkonen, 2007. "Longevity Adjustment of Pension Benefits," Discussion Papers 1073, The Research Institute of the Finnish Economy. [Downloadable!]
  3. Beetsma, Roel & Bovenberg, A Lans, 2007. "Pension systems, Intergenerational Risk Sharing and Inflation," CEPR Discussion Papers 6089, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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