Working paper

Life expectancy heterogeneity and the political support for collective annuities

Helmuth Cremer, and Philippe De Donder

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

Replaced by

Helmuth Cremer, and Philippe De Donder, Life expectancy heterogeneity and the political support for collective annuities, The Scandinavian Journal of Economics, vol. 118, July 2016, pp. 594–615.

See also

Published in

TSE Working Paper, n. 14-496, May 2014