On the optimality of public pensions in an economy with life-cyclers and myopes
AbstractIn this paper, we develop a two-period overlapping generations model with two types of individuals, life-cyclers and myopes. We revisit Feldstein’s problem by deriving the optimal level of social security using a social welfare function à la Samuelson (rather than à la Lerner). In opposition to the Lerner solution, our optimal pension benefit exhibits several interesting properties (dynamic efficiency, egalitarism, easy implementation). Then the opportunity to move to a partially funded system is examined. It turns out that a partially funded system ensures the equality of utility within and across generations. The effective use of funding opportunities is less a question of rate of return than a question of equal treatment of individuals.
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Bibliographic InfoPaper provided by Université catholique de Louvain in its series Open Access publications from Université catholique de Louvain with number info:hdl:2078/96132.
Date of creation: 2002
Date of revision:
Publication status: Published in Journal of Economic Behavior & Organization (2002) v.47, p.121-140
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Other versions of this item:
- Docquier, Frederic, 2002. "On the optimality of public pensions in an economy with life-cyclers and myopes," Journal of Economic Behavior & Organization, Elsevier, vol. 47(1), pages 121-140, January.
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