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Should pensions be progressive?

Author

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  • Fehr, Hans
  • Kallweit, Manuel
  • Kindermann, Fabian

Abstract

The present paper quantitatively characterizes the consequences of rising pension progressivity in an overlapping generations model with idiosyncratic income, disability and longevity risk as well as endogenous labor supply at the intensive and extensive margin. Focusing on the German pension system which is purely earnings related, we increase the degree of progressivity and compute the optimal mix between flat and earnings-related pensions.

Suggested Citation

  • Fehr, Hans & Kallweit, Manuel & Kindermann, Fabian, 2013. "Should pensions be progressive?," European Economic Review, Elsevier, vol. 63(C), pages 94-116.
    • Handle: RePEc:eee:eecrev:v:63:y:2013:i:c:p:94-116
    DOI: 10.1016/j.euroecorev.2013.07.004
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    More about this item

    Keywords

    Stochastic OLG model; Tax-benefit linkage; Endogenous retirement; Intra-generational risk sharing; Old-age poverty;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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