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Assessing the Applicability of Hypothetical Workers for Defined-Contribution Pensions

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  • Wade D. Pfau

    (National Graduate Institute for Policy Studies)

Abstract

An understanding of the financial and distributional consequences of Social Security reform requires knowledge about the actual life circumstances of participants, including the level and pattern of their lifetime earnings and when they retire. Some analyses of Social Security reform make simplifying assumptions about these characteristics by using “hypothetical workers” with set career paths. We seek to develop greater understanding about actual lifetime earnings patterns to compare with hypothetical workers and find discrepancies which lead typical hypothetical workers to produce a more favorable impression for defined-contribution pension reforms. We suggest modifications to make a more suitable hypothetical worker.

Suggested Citation

  • Wade D. Pfau, 2008. "Assessing the Applicability of Hypothetical Workers for Defined-Contribution Pensions," GRIPS Discussion Papers 07-11, National Graduate Institute for Policy Studies.
  • Handle: RePEc:ngi:dpaper:07-11
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    References listed on IDEAS

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    1. Steven Haider & Gary Solon, 2006. "Life-Cycle Variation in the Association between Current and Lifetime Earnings," American Economic Review, American Economic Association, vol. 96(4), pages 1308-1320, September.
    2. Edward Whitehouse, 2007. "Pensions Panorama : Retirement-Income Systems in 53 Countries," World Bank Publications, The World Bank, number 7177.
    3. Andrew Au & Olivia S. Mitchell & John W. R. Phillips, 2004. "Modeling Lifetime Earnings Paths: Hypothetical versus Actual Workers," Working Papers wp074, University of Michigan, Michigan Retirement Research Center.
    4. Steven Caldwell & Melissa Favreault & Alla Gantman & Jagadeesh Gokhale & Thomas Johnson & Laurence J. Kotlikoff, 1999. "Social Security's Treatment of Postwar Americans," NBER Chapters,in: Tax Policy and the Economy, Volume 13, pages 109-148 National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Social Security; Hypothetical Workers; Defined-Contribution Pensions;

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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