The rising longevity gap by lifetime earnings – Distributional implications for the pension system

Peter Haan, Daniel Kemptner and Holger Lüthen

The Journal of the Economics of Ageing, 2020, vol. 17, issue C

Abstract: This study uses German social security records to provide novel evidence on cohort trends of the heterogeneity in life expectancy by lifetime earnings and, additionally, documents the distributional implications of this earnings-related heterogeneity. We find a strong association between lifetime earnings and life expectancy at age 65 and show that the longevity gap is increasing across cohorts. For West German male employees born 1926–28, the longevity gap between top and bottom decile amounts to about 4 years (about 30%). This gap increases to 7 years (almost 50%) for cohorts 1947–49. We extend our analysis to the household context and show that lifetime earnings are also related to the life expectancy of the spouse. The heterogeneity in life expectancy has sizable and relevant distributional consequences for the pension system: when accounting for heterogeneous life expectancy, we find that the German pension system is regressive despite a strong link between benefits and prior contributions. We show that the internal rate of return of the pension system increases with lifetime earnings. Finally, we document an increase of the regressive structure across cohorts, which is consistent with the increasing longevity gap.

Keywords: Mortality; Lifetime inequality; Pensions; Redistribution (search for similar items in EconPapers)
JEL-codes: H55 I14 J11 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S2212828X18301452

Related works:
Working Paper: The Rising Longevity Gap by Lifetime Earnings: Distributional Implications for the Pension System (2017)
Working Paper: The Rising Longevity Gap by Lifetime Earnings: Distributional Implications for the Pension System (2017)
Working Paper: The rising longevity gap by lifetime earnings: Distributional implications for the pension system (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:joecag:v:17:y:2020:i:c:s2212828x18301452

DOI: 10.1016/j.jeoa.2019.100199

Access Statistics for this article

The Journal of the Economics of Ageing is currently edited by D.E. Bloom, A. Sousa-Poza and U. Sunde

More articles in The Journal of the Economics of Ageing from Elsevier
Bibliographic data for series maintained by Catherine Liu ().