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Benefit-Retirement Age Schedules and Redistribution in Public Pension Systems

Author

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  • Andras Simonovits

    (Institute of Economics, CERS, Hungarian Academy of Sciences
    Mathematical Institute of Budapest University of Technology
    Department of Economics of CEU)

Abstract

The dependence of benefits on the retirement age (the schedule) is an important feature in any public pension system. The nonfinancial defined contribution (NDC) pension system has recently become popular mainly because of its alleged actuarial fairness. Using the framework of mechanism design with adverse selection, these systems have theoretically been criticized because they neglect the resulting regressive intracohort redistribution: longer-lived workers retire later and are rewarded as if their life expectancies were average. We document such adverse selection on Hungarian data. The resulting redistribution can be diminished but not eliminated. Giving up the framework of mechanism design, we corroborate our earlier qualitative findings in a more realistic framework.

Suggested Citation

  • Andras Simonovits, 2015. "Benefit-Retirement Age Schedules and Redistribution in Public Pension Systems," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 65(5), pages 362-376, October.
  • Handle: RePEc:fau:fauart:v:65:y:2015:i:5:p:362-376
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    File URL: http://journal.fsv.cuni.cz/storage/1338_simonovits.pdf
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    Citations

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    Cited by:

    1. Andras Simonovits, 2018. "Designing pension benefits when longevities increase with wages," CERS-IE WORKING PAPERS 1804, Institute of Economics, Centre for Economic and Regional Studies.

    More about this item

    Keywords

    nonfinancial defined contributions; variable retirement; adverse selection; actuarial fairness;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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