Defined contribution plan vs. defined benefits plan: reforming the legal retirement age
In the context of the current debate surrounding the reform of most social security systems, this paper analyzes the political economy of the legal retirement age. Using a life-cycle model, we study the effects of changing the redistributive parameters on the optimal legal retirement age in a Pay-As-You-Go social security system. Two pension plans are studied, with opposite results. In a defined contribution plan, an increase in the redistribution levels will delay the preferred legal retirement age. On the other hand, in a defined benefits plan, the same increase in the redistribution levels will lower this preferred age.
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Volume (Year): 12 (2009)
Issue (Month): 1 ()
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