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Optimal decisions on pension plans in the presence of financial literacy costs and income inequalities

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  • Corsini, Lorenzo
  • Spataro, Luca

Abstract

Pension reforms are on the political agenda of many countries. Such reforms imply an increasing responsibility on individuals’ side in building an efficient portfolio for retirement. In this paper we provide a model describing workers’ choices on the allocation of retirement savings in presence of a) mandatory contribution; b) portfolio decision; c) financial literacy costs. In particular, we characterise the results both from a positive and normative standpoint, by highlighting the determinants of the individual’s choice, with special focus on financial literacy costs and wage level inequalities and by characterizing the optimal contribution rate to mandatory complementary pension schemes.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 30946.

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Date of creation: 2011
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Handle: RePEc:pra:mprapa:30946

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Keywords: Financial literacy; Choice on pension Plans; Optimal portfolio composition; Income inequality.;

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References

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  2. Annamaria Lusardi & Olivia S. Mitchell, 2009. "How Ordinary Consumers Make Complex Economic Decisions: Financial Literacy and Retirement Readiness," CeRP Working Papers 90, Center for Research on Pensions and Welfare Policies, Turin (Italy).
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Cited by:
  1. Corsini, Lorenzo & Spataro, Luca, 2013. "Savings for retirement under liquidity constraints: A note," Economics Letters, Elsevier, vol. 118(2), pages 258-261.

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