Optimal Actuarial Fairness in Pension Systems - a Note

John Hassler () and Assar Lindbeck

No 609, Seminar Papers from Stockholm University, Institute for International Economic Studies

Abstract: A rationale for a compulsory pension system is that the government wants to correct supposedly myopic behavior by the individuals. Given the existence of such a system, we calculate the optimal relation between marginal contributions and benefits, i.e., the optimal degree of marginal actuarial fairness, as seen from the point of view of the individuals or of the government. The following is shown to hold under general assumptions of individual utility: The optimal degree of marginal actuarial fairness increases in the rate of return in the social security system and decreases in the government’s rate of time preference. If the government’s rate of time preference is lower than the individual’s, the government gains more than the individuals by making the system more actuarially fair. It is also shown that labor supply always increases when the link between marginal contributions and benefits is strengthened.

Keywords: compulsory pension; marginal actuarial fairness (search for similar items in EconPapers)
JEL-codes: H55 (search for similar items in EconPapers)
Date: 1997-11-03
View list of references View citations in EconPapers

Downloads: (external link)
http://www.iies.su.se/publications/seminarpapers/609.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found

Related works:
Journal Article: Optimal actuarial fairness in pension systems: A note (1997)
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:hhs:iiessp:0609

Access Statistics for this paper

More papers in Seminar Papers from Stockholm University, Institute for International Economic Studies
Address: Institute for International Economic Studies, Stockholm University, S-106 91 Stockholm, Sweden
Contact information at EDIRC.
Series data maintained by Pamela Campa ().