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Mortality Regressivity and Pension Design

Author

Listed:
  • Youngsoo Jang

    (Yonsei University)

  • Svetlana Pashchenko

    (University of Georgia)

  • Ponpoje Porapakkarm

    (National Graduate Institute for Policy Studies)

Abstract

Should public policies address inequality due to heterogeneous life expectancy? Intuitively, taking short life as a disadvantage, such policies should favor those with high mortality. Yet, pension systems implicitly redistribute from low-life-expectancy to high-life-expectancy people. Moreover, this direction of redistribution is optimal from the perspective of the standard utilitarian welfare criterion. We study mortality-related redistribution in a more flexible setting. We start by establishing a formal framework for the analysis by clearly distinguishing between the redistribution along mortality and income dimensions, and thus between mortality and income progressivity. We then show that it is optimal to redistribute towards high-mortality people in two cases. First, when welfare criterion features aversion to lifetime inequality which exceeds aversion to consumption inequality. Second, when income and mortality are negatively correlated, and income redistribution tools are limited.

Suggested Citation

  • Youngsoo Jang & Svetlana Pashchenko & Ponpoje Porapakkarm, 2024. "Mortality Regressivity and Pension Design," Working papers 2025rwp-268, Yonsei University, Yonsei Economics Research Institute.
    • Handle: RePEc:yon:wpaper:2025rwp-268
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    References listed on IDEAS

    as
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    Keywords

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    JEL classification:

    • D30 - Microeconomics - - Distribution - - - General
    • D60 - Microeconomics - - Welfare Economics - - - General
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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