Indexing public pensions in progress to wages or prices

Andras Simonovits ()

No 2015, CERS-IE WORKING PAPERS from Institute of Economics, Centre for Economic and Regional Studies

Abstract: Initial public pensions are indexed to the economy-wide average wages, but pensions in progress are indexed to prices, average wages or their combinations––varying across countries and periods. We create a simple overlapping cohorts framework to study the properties of indexing pensions in progress––emphasizing a neglected issue: close wage paths should imply close benefit paths even at real wage shocks. This robustness criterion of an equitable pension system is only satisfied by wage indexing, which in turn requires the adjustment of the accrual rate. To minimize the redistribution from low-earning short-lived citizens to high-earning long-lived ones, progression should be introduced.

Keywords: public pensions; indexation; horizontal equity; pensions in progress (search for similar items in EconPapers)
JEL-codes: D10 H55 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2020-04
New Economics Papers: this item is included in nep-age and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:has:discpr:2015

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