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Optimum Delayed Retirement Credit

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  • Eytan Sheshinski

Abstract

A central question for pension design is how benefits should vary with the age of retirement beyond early eligibility age. It is often argued that in order to be neutral with respect to individual retirement decisions benefits should be actuarially fair, that is, the present value of additional contributions and benefits (’Delayed Retirement Credit’ - DRC) due to postponed retirement should be equal. We show that in a self-selection, asymmetric information model, because individual decisions are suboptimal, the socially optimal benefit structure should be less than actuarially fair.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 889.

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Date of creation: 2003
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Handle: RePEc:ces:ceswps:_889

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Keywords: delayed retirement credit; self-selection; moral hazard;

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Cited by:
  1. András Simonovits, 2004. "Designing Benefit Rules for Flexible Retirement with or without Redistribution," CESifo Working Paper Series 1370, CESifo Group Munich.
  2. Friedrich Breyer & Stefan Hupfeld, 2007. "On the Fairness of Early Retirement Provisions," CESifo Working Paper Series 2078, CESifo Group Munich.
  3. András Simonovits, 2006. "Optimal Design of Pension Rule with Flexible Retirement: The Two-Type Case," Journal of Economics, Springer, vol. 89(3), pages 197-222, December.
  4. Martin Werding, 2007. "Versicherungsmathematisch korrekte Rentenabschläge für die gesetzliche Rentenversicherung," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 60(16), pages 19-32, 08.
  5. Dirk-jan Omtzigt, 2006. "Aging and the interaction between education, retirement and the working life," Economics Series Working Papers 274, University of Oxford, Department of Economics.
  6. Heidler, Matthias & Raffelhüschen, Bernd & Leifels, Arne, 2006. "Heterogenous life expectancy, adverse selection, and retirement behaviour," FZG Discussion Papers 13, Research Center for Generational Contracts (FZG), University of Freiburg.
  7. Jean-Baptiste Michau, 2011. "Optimal Redistribution with Intensive and Extensive Labor Supply Margins: A Life-Cycle Perspective," Working Papers hal-00639121, HAL.

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