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Harsh occupations, life expectancy and social security

Author

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  • Pierre Pestieau
  • Maria Racionero

Abstract

Should special pension provisions be offered to workers in harsh occupations? We address this question in an optimal tax setting where individuals differ in longevity and occupation. Longevity is private information but workers in harsh occupations have on average shorter lifes than workers in safe occupations. We adopt a weighted utilitarian social objective to partially redress the implicit redistribution from short- to long-lived individuals that the unweighted utilitarian objective entails. We show that there is a case for differentiating the social security policy by occupation. We also show that short-lived workers are induced to overconsume when young and to retire early in order to prevent mimicking by long-lived ones. This is achieved by taxing, often quite heavily, the savings and the earnings from prolonging activity of short-lived individuals.

Suggested Citation

  • Pierre Pestieau & Maria Racionero, 2013. "Harsh occupations, life expectancy and social security," CEPR Discussion Papers 678, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  • Handle: RePEc:auu:dpaper:678
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    File URL: https://www.cbe.anu.edu.au/researchpapers/cepr/DP678.pdf
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    References listed on IDEAS

    as
    1. Pierre Pestieau & Maria Racionero, 2016. "Harsh occupations, health status and social security," Journal of Economics, Springer, vol. 117(3), pages 239-257, April.
    2. Cremer Helmuth & Lozachmeur Jean-Marie & Pestieau Pierre, 2007. "Disability Testing and Retirement," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 7(1), pages 1-34, February.
    3. Cremer, Helmuth & Lozachmeur, Jean-Marie & Pestieau, Pierre, 2004. "Social security, retirement age and optimal income taxation," Journal of Public Economics, Elsevier, vol. 88(11), pages 2259-2281, September.
    4. Geoffrey T. Sanzenbacher & Anthony Webb & Candace M. Cosgrove & Natalia S. Orlova, 2015. "Calculating Neutral Increases in Retirement Age by Socioeconomic Status," Working Papers, Center for Retirement Research at Boston College wp2015-21, Center for Retirement Research.
    5. Pierre Pestieau & Gregory Ponthiere, 2014. "Policy Implications of Changing Longevity," CESifo Economic Studies, CESifo, vol. 60(1), pages 178-212.
    6. Mao, Hong & Ostaszewski, Krzysztof M. & Wang, Yuling, 2014. "Optimal retirement age, leisure and consumption," Economic Modelling, Elsevier, vol. 43(C), pages 458-464.
    7. Antoine Bommier & Marie-Louise Leroux & Jean-Marie Lozachmeur, 2011. "Differential mortality and social security," Canadian Journal of Economics, Canadian Economics Association, vol. 44(1), pages 273-289, February.
    8. Bielecki, Marcin & Goraus, Karolina & Hagemejer, Jan & Tyrowicz, Joanna, 2016. "Decreasing fertility vs increasing longevity: Raising the retirement age in the context of ageing processes," Economic Modelling, Elsevier, vol. 52(PA), pages 125-143.
    9. Fleurbaey, Marc & Leroux, Marie-Louise & Ponthiere, Gregory, 2014. "Compensating the dead," Journal of Mathematical Economics, Elsevier, vol. 51(C), pages 28-41.
    10. Pierre PESTIEAU & Gregory PONTHIERE, 2016. "Longevity Variations and the Welfare State," JODE - Journal of Demographic Economics, Cambridge University Press, vol. 82(2), pages 207-239, June.
    11. Emmanuelle Cambois & Caroline Laborde & Isabelle Romieu & Jean-Marie Robine, 2011. "Occupational inequalities in health expectancies in France in the early 2000s: Unequal chances of reaching and living retirement in good health," Demographic Research, Max Planck Institute for Demographic Research, Rostock, Germany, vol. 25(12), pages 407-436, August.
    12. Asghar Zaidi & Edward Whitehouse, 2009. "Should Pension Systems Recognise "Hazardous and Arduous Work"?," OECD Social, Employment and Migration Working Papers 91, OECD Publishing.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Should firemen and police officers retire earlier?
      by Economic Logician in Economic Logic on 2013-03-04 22:08:00

    Citations

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    Cited by:

    1. Pierre Pestieau & Grégory Ponthière, 2012. "The public economics of increasing longevity," Working Papers halshs-00676492, HAL.
    2. Leroux, Marie-Louise & Pestieau, Pierre & Ponthière, Grégory, 2015. "Longévité différentielle et redistribution : enjeux théoriques et empiriques," L'Actualité Economique, Société Canadienne de Science Economique, vol. 91(4), pages 465-497, Décembre.
    3. Pierre Pestieau & Gregory Ponthiere, 2012. "The Public Economics of Increasing Longevity," Hacienda Pública Española, IEF, vol. 200(1), pages 41-74, March.
    4. Pierre Pestieau & Grégory Ponthiere, 2012. "On the Policy Implications of Changing Longevity," CESifo Working Paper Series 3926, CESifo Group Munich.
    5. repec:spr:izalbr:v:6:y:2017:i:1:d:10.1186_s40172-017-0054-3 is not listed on IDEAS

    More about this item

    Keywords

    longevity; retirement; harsh occcupations; tagging;

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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