Campus Units

Economics

Document Type

Article

Publication Version

Published Version

Publication Date

6-2021

Journal or Book Title

Journal of Demographic Economics

Volume

87

Issue

2

First Page or Article ID Number

169

Last Page

212

DOI

10.1017/dem.2020.13

Abstract

Under dynamic efficiency, a pay-as-you-go (PAYG) pension scheme helps the current generation of retirees but hurts future generations because they are forced to save via a return-dominated scheme. Abandoning it is deemed welfare-improving but typically not for all generations. But what if agents are present-biased (hence, undersave for retirement) and the “paternalistically motivated forced savings” component of a PAYG scheme motivated its existence in the first place? This paper shows it is possible to transition from such a PAYG scheme on to a higher return, mandated fully-funded scheme; yet, no generation is hurt in the process. The results inform the debate on policy design of pension systems as more and more policy makers push for the transition to take place but are forced to recognize that current retirees may get hurt along the way.

JEL Classification

H55, D91, D03, E6

Comments

This article is published as Andersen, Torben M., Joydeep Bhattacharya, and Marias H. Gestsson. "Pareto-improving transition to fully funded pensions under myopia." Journal of Demographic Economics 87, no. 2 (2021): 169-212. doi:10.1017/dem.2020.13.

Creative Commons License

Creative Commons Attribution 4.0 International License
This work is licensed under a Creative Commons Attribution 4.0 International License.

Copyright Owner

Université catholique de Louvain

Language

en

File Format

application/pdf

Working Paper

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