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Inequality, Life Expectancy, and the Intragenerational Redistribution Puzzle - Some Experimental Evidence

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  • Tim Krieger
  • Christine Meemann
  • Stefan Traub

Abstract

In most OECD countries, pension reform policy has decreased the level of intragenerational redistribution over the last three decades, that is, redistribution among members of the same generation with high and low pension entitlements. This trend has occurred despite heterogeneity in life expectancy linked to socioeconomic status having a regressive impact on out-comes. This paper contributes to solving this puzzle by means of a controlled laboratory experiment. We study the causal relationship between inequality of entitlements, mortality risk, and the size of redistribution in a stylized social security system. We find that mortality risk, when negatively correlated with entitlements, significantly lowers subjects’ willingness to redistribute payoffs from high-entitlement to low-entitlement subjects. We explain this finding with efficiency preferences and an alienation effect. The alienation effect is the tendency to attach a lower social weight to the short-lived poor.

Suggested Citation

  • Tim Krieger & Christine Meemann & Stefan Traub, 2022. "Inequality, Life Expectancy, and the Intragenerational Redistribution Puzzle - Some Experimental Evidence," CESifo Working Paper Series 9677, CESifo.
  • Handle: RePEc:ces:ceswps:_9677
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    Cited by:

    1. Jonas Klos & Tim Krieger & Sven Stöwhase, 2022. "Measuring intra-generational redistribution in PAYG pension schemes," Public Choice, Springer, vol. 190(1), pages 53-73, January.

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    More about this item

    Keywords

    inequality; life expectancy; risk; redistribution; pension reform; efficiency preferences; alienation effect experiment;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • I14 - Health, Education, and Welfare - - Health - - - Health and Inequality

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