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Reforming the Retirement Scheme: Flexible Retirement versus Legal Retirement Age

  • Juan A. Lacomba
  • Francisco M. Lagos

We compare a social security system where people can retire at an age of their own choice with one in which there is a legal retirement age elected through a majority voting process. We show that individuals prefer a legal retirement age higher than the one they would choose in the flexible scheme. In spite of this, we show that when the legal retirement age significantly limits the retirement age of high-wage workers, a flexible scheme would improve the financing of the pension system. Finally, we show that even when pension benefits are higher with a legal retirement age, a flexible system might be implemented.

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Article provided by Mohr Siebeck, Tübingen in its journal FinanzArchiv.

Volume (Year): 68 (2012)
Issue (Month): 3 (September)
Pages: 252-268

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Handle: RePEc:mhr:finarc:urn:sici:0015-2218(201209)68:3_252:rtrsfr_2.0.tx_2-a
DOI: 10.1628/001522108X653831
Contact details of provider: Web page: https://www.mohr.de/fa

Order Information: Postal: Mohr Siebeck GmbH & Co. KG, P.O.Box 2040, 72010 Tübingen, Germany
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  1. J. Ignacio Conde-Ruiz & Vincenzo Galasso, . "The Macroeconomics of Early Retirement," Working Papers 2003-05, FEDEA.
  2. CASAMATTA, Georges & CREMER , Helmuth & PESTIEAU, Pierre, . "The political economy of social security," CORE Discussion Papers RP 1475, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Casamatta, Georges & Cremer, Helmuth & Pestieau, Pierre, 2000. "Political sustainability and the design of social insurance," Journal of Public Economics, Elsevier, vol. 75(3), pages 341-364, March.
  4. Juan Antonio Lacomba & Francisco Miguel Lagos, 2005. "Political Election on Legal Retirement Age," ThE Papers 05/10, Department of Economic Theory and Economic History of the University of Granada..
  5. J. Ignacio Conde-Ruiz & Vincenzo Galasso, 2003. "Early Retirement," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(1), pages 12-36, January.
  6. Georges Casamatta & Helmuth Cremer & Pierre Pestieau, 2005. "Voting on Pensions with Endogenous Retirement Age," Post-Print halshs-00754105, HAL.
  7. Juan Antonio Lacomba & Francisco Miguel Lagos, 2005. "Population Aging and Legal Retirement Age," ThE Papers 05/16, Department of Economic Theory and Economic History of the University of Granada..
  8. John B. Burbidge & A. Leslie Robb, 1980. "Pensions and Retirement Behaviour," Canadian Journal of Economics, Canadian Economics Association, vol. 13(3), pages 421-37, August.
  9. Epple, Dennis & Romano, Richard E, 1996. "Public Provision of Private Goods," Journal of Political Economy, University of Chicago Press, vol. 104(1), pages 57-84, February.
  10. Vincent P. Crawford & David M. Lilien, 1981. "Social Security and the Retirement Decision," The Quarterly Journal of Economics, Oxford University Press, vol. 96(3), pages 505-529.
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