Forced saving, redistribution and nonlinear social security schemes

Helmuth Cremer (), Philippe De Donder, Darío Maldonado () and Pierre PESTIEAU
Additional contact information
Pierre PESTIEAU: UniversitŽ catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE)

No 2008020, CORE Discussion Papers from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: This paper studies the design of a nonlinear social security scheme in a society where individuals differ in two respects: productivity and degree of myopia. Myopic individuals may not save "enough" for their retirement because their "myopic self" emerges when labor supply and savings decisions are made. The social welfare function is paternalistic: the rate of time preference of the far-sighted (which corresponds to the "true" preferences of the myopics) is used for both types. We show that the paternalistic solution does not necessarily imply forced savings for the myopics. This is because paternalistic considerations are mitigated or even outweighed by incentive effects. Our numerical results suggest that as the number of myopic individuals increases, there is less redistribution and more forced saving. Furthermore, as the number of myopic increases, the desirability of social security (measured by the difference between social welfare with and without social security) increases.

Keywords: social security; myopia; dual-self model (search for similar items in EconPapers)
JEL-codes: H55 D91 (search for similar items in EconPapers)
Date: 2008-03-01
View citations in EconPapers

Downloads: (external link)
http://www.uclouvain.be/cps/ucl/doc/core/documents/coreDP2008_20.pdf (application/pdf)

Related works:
Working Paper: Forced Saving, Redistribution and Nonlinear Social Security Schemes (2008)
Working Paper: Forced Saving, Redistribution and Nonlinear Social Security Schemes (2008)
Journal Article: Forced Saving, Redistribution, and Nonlinear Social Security Schemes (2009)
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: http://EconPapers.repec.org/RePEc:cor:louvco:2008020

Access Statistics for this paper

More papers in CORE Discussion Papers from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)
Address: Voie du Roman Pays 34, 1348 Louvain-la-Neuve (Belgium)
Contact information at EDIRC.
Series data maintained by Alain GILLIS ().