EconPapers    
Economics at your fingertips  
 

Why mandate young borrowers to contribute to their retirement accounts?

Torben M. Andersen and Joydeep Bhattacharya ()

ISU General Staff Papers from Iowa State University, Department of Economics

Abstract: Many countries, in an effort to address the problem that too many retirees have too little saved up, impose mandatory contributions into retirement accounts, that too, in an age-independent manner. This is puzzling because such funded pension schemes effectively mandate the young, who wish to borrow, to save for retirement. Further, if agents are present-biased, they disagree with the intent of such schemes and attempt to undo them by reducing their own saving or even borrowing against retirement wealth. We establish a welfare case for mandating the middle-aged and the young to contribute to their retirement accounts, even with age-independent contribution rates. We find, somewhat counter-intuitively, that pitted against laissez faire, mandatory pensions succeed by incentivizing the young to borrow more and the middle-aged to save nothing on their own, in effect, rendering the latter's present-biasedness inconsequential.

Date: 2021-02-01
New Economics Papers: this item is included in nep-age and nep-dge
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

Downloads: (external link)
https://lib.dr.iastate.edu/cgi/viewcontent.cgi?art ... t=econ_workingpapers

Related works:
Journal Article: Why mandate young borrowers to contribute to their retirement accounts? (2021) Downloads
Working Paper: Why Mandate Young Borrowers to Contribute to their Retirement Accounts? (2017) Downloads
Working Paper: Why mandate young borrowers to contribute to their retirement accounts? (2016) Downloads
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:isu:genstf:202102010800001016

Access Statistics for this paper

More papers in ISU General Staff Papers from Iowa State University, Department of Economics Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070. Contact information at EDIRC.
Bibliographic data for series maintained by Curtis Balmer ().

 
Page updated 2022-10-05
Handle: RePEc:isu:genstf:202102010800001016