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Uncertain Length of Life, Retirement Age, and Optimal Pension Design

Thomas Aronsson and Sören Blomquist

No 6940, CESifo Working Paper Series from CESifo Group Munich

Abstract: In this paper, we consider how the hours of work and retirement age ought to respond to a change in the uncertainty of the length of life. In a first best framework, where a benevolent government exercises perfect control over the individuals’ labor supply and retirement-decisions, the results show that a decrease in the standard deviation of life-length leads to an increase in the optimal retirement age and a decrease in the hours of work per period spent working. This result is robust, and is also derived in models of decentralized decision-making where individuals decide on their own consumption, labor supply, and retirement age, and where the government attempts to affect their behavior and welfare through redistribution and pension policy.

Keywords: uncertain lifetime; retirement age; work hours; pension policy (search for similar items in EconPapers)
JEL-codes: D61 D80 H21 H55 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-age, nep-dem, nep-hea and nep-pbe
Date: 2018
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