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Designing Benefit Rules for Flexible Retirement with or without Redistribution

Author

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  • András Simonovits

Abstract

The traditional approach to flexible retirement (e.g. NDC) neglects the impact of asymmetric information on actuarial fairness (neutrality). The mechanism design approach (e.g. Diamond, 2003) gives up the requirement of neutrality and looks for a redistributive second-best benefit-retirement-age schedule. Trying to combine the two approaches, the present paper determines the neutral (redistribution-free) second-best solution. This neutral solution is, however, often Pareto-dominated by the redistributive one.

Suggested Citation

  • András Simonovits, 2004. "Designing Benefit Rules for Flexible Retirement with or without Redistribution," CESifo Working Paper Series 1370, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_1370
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    File URL: http://www.cesifo-group.de/DocDL/cesifo1_wp1370.pdf
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    References listed on IDEAS

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    1. J. A. Mirrlees, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Oxford University Press, vol. 38(2), pages 175-208.
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    3. Diamond, P. A. & Mirrlees, J. A., 1978. "A model of social insurance with variable retirement," Journal of Public Economics, Elsevier, vol. 10(3), pages 295-336, December.
    4. J. A. Mirrlees & P. Diamond, 1982. "Social Insurance with Variable Retirement and Private Saving," Working papers 296, Massachusetts Institute of Technology (MIT), Department of Economics.
    5. Peter Diamond, 2004. "Social Security," American Economic Review, American Economic Association, vol. 94(1), pages 1-24, March.
    6. Simonovits, Andr S, 2003. "Designing optimal linear rules for flexible retirement," Journal of Pension Economics and Finance, Cambridge University Press, vol. 2(03), pages 273-293, November.
    7. Eytan Sheshinski, 2002. "Optimum Delayed Retirement Credit," Discussion Paper Series dp329, The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem.
    8. Courtney Coile & Jonathan Gruber, 2000. "Social Security and Retirement," NBER Working Papers 7830, National Bureau of Economic Research, Inc.
    9. Peter Eso & Andras Siminovits, 2002. "Designing Optimal Benefit Rules for Flexible Retirement," Discussion Papers 1353, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    10. Valdes-Prieto, Salvador, 2000. " The Financial Stability of Notional Account Pensions," Scandinavian Journal of Economics, Wiley Blackwell, vol. 102(3), pages 395-417, June.
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    Citations

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    Cited by:

    1. Andras Simonovits, 2013. "Regressive intracohort redistribution in nonfinancial defined contribution pension," IEHAS Discussion Papers 1312, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
    2. András Simonovits, 2006. "Optimal Design of Pension Rule with Flexible Retirement: The Two-Type Case," Journal of Economics, Springer, vol. 89(3), pages 197-222, December.
    3. Juan A. Lacomba & Francisco M. Lagos, 2009. "Reforming the retirement scheme: Flexible retirement vs. Legal retirement age," ThE Papers 09/01, Department of Economic Theory and Economic History of the University of Granada..
    4. Heidler, Matthias & Raffelhüschen, Bernd & Leifels, Arne, 2006. "Heterogenous life expectancy, adverse selection, and retirement behaviour," FZG Discussion Papers 13, University of Freiburg, Research Center for Generational Contracts (FZG).

    More about this item

    Keywords

    flexible retirement; asymmetric information; actuarial fairness (neutrality); mechanism design;

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