Mortality Regressivity and Pension Design

Youngsoo Jang, Svetlana Pashchenko and Ponpoje Porapakkarm
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Youngsoo Jang: Yonsei University
Svetlana Pashchenko: University of Georgia
Ponpoje Porapakkarm: National Graduate Institute for Policy Studies

No 2025rwp-268, Working papers from Yonsei University, Yonsei Economics Research Institute

Abstract: Should public policies address inequality due to heterogeneous life expectancy? Intuitively, taking short life as a disadvantage, such policies should favor those with high mortality. Yet, pension systems implicitly redistribute from low-life-expectancy to high-life-expectancy people. Moreover, this direction of redistribution is optimal from the perspective of the standard utilitarian welfare criterion. We study mortality-related redistribution in a more flexible setting. We start by establishing a formal framework for the analysis by clearly distinguishing between the redistribution along mortality and income dimensions, and thus between mortality and income progressivity. We then show that it is optimal to redistribute towards high-mortality people in two cases. First, when welfare criterion features aversion to lifetime inequality which exceeds aversion to consumption inequality. Second, when income and mortality are negatively correlated, and income redistribution tools are limited.

Keywords: Mortality-related redistribution; Welfare criteria; Pensions; Prioritarianism (search for similar items in EconPapers)
JEL-codes: D30 D60 D63 H55 (search for similar items in EconPapers)
Pages: 51pages
Date: 2024-10
New Economics Papers: this item is included in nep-age, nep-dem, nep-hea and nep-upt
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