Fair Retirement Under Risky Lifetime

Marc Fleurbaey, Marie-Louise Leroux, Pierre Pestieau and Gregory Ponthiere
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Pierre Pestieau: CORE - Center of Operation Research and Econometrics [Louvain] - UCL - Université Catholique de Louvain = Catholic University of Louvain, PSE - Paris-Jourdan Sciences Economiques - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, CEPR - Center for Economic Policy Research

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Abstract: A premature death unexpectedly brings a life and a career to their end, leading to substantial welfare losses. We study the retirement decision in an economy with risky lifetime, and compare the laissez-faire with egalitarian social optima. We consider two social objectives: (1) the maximin on expected lifetime welfare (ex ante), allowing for a compensation for unequal life expectancies; (2) the maximin on realized lifetime welfare (ex post), allowing for a compensation for unequal lifetimes. The latter optimum involves, in general, decreasing lifetime consumption profiles, as well as raising the retirement age, unlike the ex ante egalitarian optimum. This result is robust to the introduction of unequal life expectancies and unequal productivities. Hence, the postponement of the retirement age can, quite surprisingly, be defended on egalitarian grounds --although the conclusion is reversed when mortality strikes only after retirement.

Keywords: Risky lifetime; Mortality; Labour supply; Retirement; Compensation (search for similar items in EconPapers)
Date: 2013-09
New Economics Papers: this item is included in nep-age, nep-dem and nep-hea
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00857945v1
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Citations: View citations in EconPapers (30)

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Related works:
Journal Article: FAIR RETIREMENT UNDER RISKY LIFETIME* (2016)
Working Paper: Fair Retirement Under Risky Lifetime (2016)
Working Paper: Fair retirement under risky lifetime (2016)
Working Paper: Fair retirement under risky lifetime (2016)
Working Paper: Fair retirement under risky lifetime (2013)
Working Paper: Fair Retirement Under Risky Lifetime (2013)
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