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Optimal decisions on pension plans in the presence of financial literacy costs and income inequalities

Author

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  • Corsini, Lorenzo
  • Spataro, Luca

Abstract

Pension reforms are on the political agenda of many countries. Such reforms imply an increasing responsibility on individuals’ side in building an efficient portfolio for retirement. In this paper we provide a model describing workers’ choices on the allocation of retirement savings in presence of a) mandatory contribution; b) portfolio decision; c) financial literacy costs. In particular, we characterise the results both from a positive and normative standpoint, by highlighting the determinants of the individual’s choice, with special focus on financial literacy costs and wage level inequalities and by characterizing the optimal contribution rate to mandatory complementary pension schemes.

Suggested Citation

  • Corsini, Lorenzo & Spataro, Luca, 2011. "Optimal decisions on pension plans in the presence of financial literacy costs and income inequalities," MPRA Paper 30946, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:30946
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    File URL: https://mpra.ub.uni-muenchen.de/30946/1/MPRA_paper_30946.pdf
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    References listed on IDEAS

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    4. Raimond Maurer & Olivia S. Mitchell & Ralph Rogalla, 2010. "The Effect of Uncertain Labor Income and Social Security on Life-cycle Portfolios," NBER Working Papers 15682, National Bureau of Economic Research, Inc.
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    6. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66, pages 467-467.
    7. Sita Nataraj & John B. Shoven, 2003. "Comparing the Risks of Social Security with and without Individual Accounts," American Economic Review, American Economic Association, vol. 93(2), pages 348-353, May.
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    Cited by:

    1. Corsini, Lorenzo & Spataro, Luca, 2013. "Savings for retirement under liquidity constraints: A note," Economics Letters, Elsevier, vol. 118(2), pages 258-261.

    More about this item

    Keywords

    Financial literacy; Choice on pension Plans; Optimal portfolio composition; Income inequality.;

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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