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Uncertain Length of Life, Retirement Age, and Pension Design

Author

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  • Thomas Aronsson
  • Sören Blomquist

Abstract

In this paper, we consider how the hours of work and retirement age ought to respond to a change in the uncertainty of the length of life. The results show that a decrease in the standard deviation of life-length leads to an increase in the socially optimal retirement age and a decrease in the hours of work per period spent working, if the preferences for the number of years spent in retirement are characterized by constant or decreasing absolute risk version. We also show how a benevolent policy maker can implement the social optimum through an actuarially fair pension policy.

Suggested Citation

  • Thomas Aronsson & Sören Blomquist, 2024. "Uncertain Length of Life, Retirement Age, and Pension Design," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 80(1), pages 111-128.
    • Handle: RePEc:mhr:finarc:urn:doi:10.1628/fa-2023-0013
    DOI: 10.1628/fa-2023-0013
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    More about this item

    Keywords

    uncertain lifetime; retirement age; work hours; pension policy;
    All these keywords.

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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