Fair Retirement Under Risky Lifetime
AbstractA premature death unexpectedly brings a life and a career to their end, leading to substantial welfare losses. We study the retirement decision in an economy with risky lifetime, and compare the laissez-faire with egalitarian social optima. We consider two social objectives: (1) the maximin on expected lifetime welfare (ex ante), allowing for a compensation for unequal life expectancies; (2) the maximin on realized lifetime welfare (ex post), allowing for a compensation for unequal lifetimes. The latter optimum involves, in general, decreasing lifetime consumption profiles, as well as raising the retirement age, unlike the ex ante egalitarian optimum. This result is robust to the introduction of unequal life expectancies and unequal productivities. Hence, the postponement of the retirement age can, quite surprisingly, be defended on egalitarian grounds --although the conclusion is reversed when mortality strikes only after retirement.
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Date of creation: Sep 2013
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Risky lifetime ; Mortality ; Labour supply ; Retirement ; Compensation;
Other versions of this item:
- I14 - Health, Education, and Welfare - - Health - - - Health and Inequality
- I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
- J10 - Labor and Demographic Economics - - Demographic Economics - - - General
- J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
This paper has been announced in the following NEP Reports:
- NEP-AGE-2013-09-13 (Economics of Ageing)
- NEP-ALL-2013-09-13 (All new papers)
- NEP-DEM-2013-09-13 (Demographic Economics)
- NEP-HEA-2013-09-13 (Health Economics)
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- #HEJC papers for October 2013
by academichealtheconomists in The Academic Health Economists' Blog on 2013-09-30 23:30:26
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