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Fair Retirement Under Risky Lifetime

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Listed:
  • FLEURBAEY, Marc
  • LEROUX, Marie-Louise
  • PESTIEAU, Pierre
  • PONTHIÈRE, Gregory

Abstract

A premature death unexpectedly brings a life and a career to their end, leading to substantial welfare losses. We study the retirement decision in an economy with risky lifetime and compare the laissez‐faire with egalitarian social optima. We consider two social objectives: (1) the maximin on expected lifetime welfare, allowing for a compensation for unequal life expectancies, and (2) the maximin on realized lifetime welfare, allowing for a compensation for unequal lifetimes. The latter optimum involves, in general, decreasing lifetime consumption profiles as well as raising the retirement age. This result is robust to the introduction of unequal life expectancies and unequal productivities.
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Suggested Citation

  • FLEURBAEY, Marc & LEROUX, Marie-Louise & PESTIEAU, Pierre & PONTHIÈRE, Gregory, "undated". "Fair Retirement Under Risky Lifetime," CORE Discussion Papers RP 2729, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  • Handle: RePEc:cor:louvrp:2729
    Note: In : International Economic Review, 57(1) 2016, p. 117-210
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    References listed on IDEAS

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    1. Kahn, James A., 1988. "Social security, liquidity, and early retirement," Journal of Public Economics, Elsevier, vol. 35(1), pages 97-117, February.
    2. Cremer, Helmuth & Pestieau, Pierre, 2003. "The Double Dividend of Postponing Retirement," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 10(4), pages 419-434, August.
    3. Gary S. Becker & Tomas J. Philipson & Rodrigo R. Soares, 2005. "The Quantity and Quality of Life and the Evolution of World Inequality," American Economic Review, American Economic Association, vol. 95(1), pages 277-291, March.
    4. Marc Fleurbaey, 2010. "Assessing Risky Social Situations," Journal of Political Economy, University of Chicago Press, vol. 118(4), pages 649-680, August.
    5. 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.
    6. Bertrand Crettez & Patricia Le Maitre, 2002. "Optimal age of retirement and population growth," Journal of Population Economics, Springer;European Society for Population Economics, vol. 15(4), pages 737-755.
    7. Deaton, Angus S & Paxson, Christina H, 1998. "Aging and Inequality in Income and Health," American Economic Review, American Economic Association, vol. 88(2), pages 248-253, May.
    8. Sheshinski, Eytan, 1978. "A model of social security and retirement decisions," Journal of Public Economics, Elsevier, vol. 10(3), pages 337-360, December.
    9. 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.
    10. Brouwer, Werner B.F. & van Exel, N. Job A., 2005. "Expectations regarding length and health related quality of life: Some empirical findings," Social Science & Medicine, Elsevier, vol. 61(5), pages 1083-1094, September.
    11. Fleurbaey, Marc, 2012. "Fairness, Responsibility, and Welfare," OUP Catalogue, Oxford University Press, number 9780199653591.
    12. 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.
    13. Philippe Michel & Pierre Pestieau, 2002. "Optimal Taxation of Capital and Labor Income with Social Security and Variable Retirement Age," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 59(2), pages 163-163, May.
    14. Fleurbaey, Marc & Leroux, Marie-Louise & Ponthiere, Gregory, 2014. "Compensating the dead," Journal of Mathematical Economics, Elsevier, vol. 51(C), pages 28-41.
    15. Harriet Orcutt Duleep, 1986. "Measuring the Effect of Income on Adult Mortality Using Longitudinal Administrative Record Data," Journal of Human Resources, University of Wisconsin Press, vol. 21(2), pages 238-251.
    16. Jonathan Gruber & David A. Wise, 1999. "Social Security and Retirement around the World," NBER Books, National Bureau of Economic Research, Inc, number grub99-1, June.
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    Cited by:

    1. repec:clr:wugarc:y:2016v:42i:03p:465 is not listed on IDEAS
    2. Marc Fleurbaey & Marie-Louise Leroux & Pierre Pestieau & Grégory Ponthière & Stéphane Zuber, 2017. "Premature Deaths, Accidental Bequests and Fairness," Cahiers de recherche 1704, Chaire de recherche Industrielle Alliance sur les enjeux économiques des changements démographiques.
    3. repec:clr:wugarc:y:2016v:42i:3p:465 is not listed on IDEAS
    4. Grégory Ponthière, 2018. "A Theory of Reverse Retirement," PSE Working Papers halshs-01789651, HAL.
    5. Johanna Etner & Natacha Raffin & Thomas Seegmuller, 2018. "Male Reproductive Health, Fairness and Optimal Policies," Working Papers halshs-01798983, HAL.
    6. No authors listed, 2016. "Überlegungen zur fairen und nachhaltigen Ausgestaltung eines Pensionskontensystems," Working Paper Reihe der AK Wien - Materialien zu Wirtschaft und Gesellschaft 159, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik.

    More about this item

    JEL classification:

    • I14 - Health, Education, and Welfare - - Health - - - Health and Inequality
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • J10 - Labor and Demographic Economics - - Demographic Economics - - - General
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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