Benefit-retirement age schedules and redistribution in public pension systems

András Simonovits ()
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András Simonovits: Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences also Department of Economics, Central European University and Mathematical Institute, Budapest University of Technology

No 1430, CERS-IE WORKING PAPERS from Institute of Economics, Centre for Economic and Regional Studies

Abstract: The dependence of benefit on the retirement age (the schedule) is an important feature in any public pension system. The nonfinancial defined contribution (NDC) pension system has recently become popular mainly because of its allegedly actuarial fairness. Using the framework of mechanism design with adverse selection, these systems have theoretically been criticized because they neglect the resulting regressive intracohort redistribution: longer lived workers retire later and are rewarded as if their life expectancies were average. We document such adverse selection on Hungarian data. The resulting redistribution can be diminished but not eliminated. Giving up mechanism design, we corroborate our earlier qualitative findings in a more realistic framework.

Keywords: nonfinancial defined contributions; variable retirement; adverse selection; actuarial fairness (search for similar items in EconPapers)
JEL-codes: C61 C63 D82 D91 H55 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2014-11
New Economics Papers: this item is included in nep-age
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