Reference

Helmuth Cremer, and Philippe De Donder, Life expectancy heterogeneity and the political support for collective annuities, TSE Working Paper, n. 14-496, May 2014.

Abstract

Individuals, differing in productivity and life expectancy, vote over the size and type of a collective annuity. Its type is represented by the fraction of the contributive (Bismarckian) component (based on the worker's past earnings) as opposed to the non-contributive (Beveridgean) part (based on average contribution). The equilibrium collective annuity is either a large mostly Bismarckian program, a smaller pure Beveridgean one (in accordance with empirical evidence), or nil. A larger correlation between longevity and productivity, or a larger average life expectancy, both make the equilibrium collective annuity program more Beveridgean, although at the expense of its size.

Keywords

generosity; redistributiveness; pay-as-you-go pensions; collective annuity; longevity; Kramer-Shepsle structure-induced equilibrium

JEL codes

  • D78: Positive Analysis of Policy Formulation and Implementation
  • H55: Social Security and Public Pensions

Helmuth Cremer, and Philippe De Donder, Life expectancy heterogeneity and the political support for collective annuities, The Scandinavian Journal of Economics, 2016, forthcoming.