Economic analysis of pension fund’s laws for female heirs: case of Iran’s civil servants pension fund (CSPF)

The key twin objectives of pension and retirement system are income security and consumption smoothing for members and their family (heirs). Accordingly, pension funds worldwide devise laws that preserve and improve these key objectives. Laws that failed to take into account these objectives not only impose extra financial burden on the pension system, but also may pose undesirable social and economic effects. In this respect, economic analysis of pension laws would help lawmakers to make workable and implementable laws. Generally, economic analysis of law seeks to answer two basic questions regarding legal rules: what are the effects of legal rules on the behavior of relevant actors? And are these effects socially desirable? This paper examines the pension law of Iran’s civil servant pension fund (CSPF) for female heirs in light of the afore-mentioned key objectives of pension system, and from social justice point of view. The results from the analysis reveal that this does not only adhere to social justice and pension system’s main purpose, but also it imposes economic and social costs. The weak side of the law also creates financial burden on the pension fund, the young generation (paying pension benefits to the considered heirs from its contribution) and the public at large. The study also shows that life time payment of pensions to heirs by CSPF encourages late or informal marriages hence defecting acceptable social norms and may increase informal labor supply, creating a further problem in the labor market. The study thus recommends the need for reforming the existing law and rules of CSPF for female heirs. Copyright Springer Science+Business Media, LLC 2013