Optimum Delayed Retirement Credit
AbstractA 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 InfoPaper provided by The Center for the Study of Rationality, Hebrew University, Jerusalem in its series Discussion Paper Series with number dp329.
Length: 13 pages
Date of creation: Sep 2002
Date of revision:
delayed retirement credit; self-selection; moral hazard;
Other versions of this item:
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
- J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
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