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The Standard Deviation of Life-Length, Retirement Incentives, and Optimal Pension Design
Umeå Universitet.
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Economics.
2010 (English)Report (Other academic)
Abstract [en]

In this paper, we consider how the retirement age as well as a tax financed pension system ought to respond to a change in the standard deviation of the length of life. In a first best framework, where a benevolent government exercises perfect control over the individuals’ labor supply and retirement-decisions, the results show that a decrease in the standard deviation of life-length leads to an increase in the optimal retirement age and vice versa, if the preferences for “the number of years spent in retirement” are characterized by constant or decreasing absolute risk aversion. A similar result follows in a second best setting, where the government raises revenue via a proportional tax (or pension fee) to finance a lump-sum benefit per year spent in retirement. We consider two versions of this model, one with a mandatory retirement age decided upon by the government and the other where the retirement age is a private decision-variable.

Place, publisher, year, edition, pages
Uppsala, 2010. , 24 p.
Series
Working Paper, Uppsala Center for Fiscal Studies, Uppsala University, 2010:11
Keyword [en]
lifetime, retirement, pension system
National Category
Economics
Research subject
Economics
Identifiers
URN: urn:nbn:se:uu:diva-131485OAI: oai:DiVA.org:uu-131485DiVA: diva2:354407
Available from: 2010-10-01 Created: 2010-10-01 Last updated: 2010-11-17Bibliographically approved

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CiteExportLink to record
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