Voting Over Type and Generosity of a Pension System When Some Individuals are Myopic
Pierre Pestieau,
Helmuth Cremer,
Philippe De Donder and
Darío Maldonado
No 5923, CEPR Discussion Papers from C.E.P.R. Discussion Papers
Abstract:
This paper studies the determination through majority voting of a pension scheme when society consists of far-sighted and myopic individuals. All individuals have the same basic preferences but myopics tend to adopt a short term view (instant gratification) when dealing with retirement saving. Consequently, they will find themselves with low consumption after retirement and regret their insufficient savings decisions. Henceforth, when voting they tend to commit themselves into forced saving. We consider a pension scheme that is characterized by two parameters: the payroll tax rate (that determines the size or generosity of the system) and the 'Bismarckian factor' that determines its redistributiveness. Individuals vote sequentially. We examine how the introduction of myopic agents affects the generosity and the redistributiveness of the pension system. Our main result is that a flat pension system is always chosen when all individuals are of one kind (all far-sighted or all myopic), while a less redistributive system may be chosen if society is composed of both myopic and far-sighted agents. Furthermore, while myopic individuals tend to prefer larger payroll taxes than their far-sighted counterparts, the generosity of the system does not always increase with the proportion of myopics.
Keywords: Social security; Myopia; Dual-self model (search for similar items in EconPapers)
JEL-codes: D91 H55 (search for similar items in EconPapers)
Date: 2006-10
New Economics Papers: this item is included in nep-cdm, nep-pbe and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)
Downloads: (external link)
https://cepr.org/publications/DP5923 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org
Related works:
Chapter: Voting over Type and Generosity of a Pension System When Some Individuals Are Myopic (2007)
Journal Article: Voting over type and generosity of a pension system when some individuals are myopic (2007) 
Working Paper: Voting over type and generosity of a pension system when some individuals are myopic (2007)
Working Paper: Voting over type and generosity of a pension system when some individuals are myopic (2007)
Working Paper: Voting over type and generosity of a pension system when some individuals are myopic (2006) 
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:cpr:ceprdp:5923
Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP5923
Access Statistics for this paper
More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().