Fair retirement under risky lifetime

Marc Fleurbaey, Marie-Louise Leroux, Pierre Pestieau and Gregory Ponthiere

No 2013049, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: A premature death unexpectedly brings a life and a career to their end, leading to substantial welfare losses. We study the retirement decision in an economy with risky lifetime, and compare the laissez-faire with egalitarian social optima. We consider two social objectives: (1) the maximin on expected lifetime welfare (ex ante), allowing for a compensation for unequal life expectancies; (2) the maximin on realized lifetime welfare (ex post), allowing for a compensation for unequal lifetimes. The latter optimum involves, in general, decreasing lifetime consumption profiles, as well as raising the retirement age, unlike the ex ante egalitarian optimum. This result is robust to the introduction of unequal life expectancies and unequal productivities. Hence, the postponement of the retirement age can, quite surprisingly, be defended on egalitarian grounds - although the conclusion is reversed when mortality strikes only after retirement.

Keywords: risky lifetime; mortality; labour supply; retirement; compensation (search for similar items in EconPapers)
JEL-codes: I14 I18 J10 J22 (search for similar items in EconPapers)
Date: 2013-09-23
New Economics Papers: this item is included in nep-age and nep-hea
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Related works:
Journal Article: FAIR RETIREMENT UNDER RISKY LIFETIME* (2016)
Working Paper: Fair Retirement Under Risky Lifetime (2016)
Working Paper: Fair retirement under risky lifetime (2016)
Working Paper: Fair retirement under risky lifetime (2016)
Working Paper: Fair Retirement Under Risky Lifetime (2013)
Working Paper: Fair Retirement Under Risky Lifetime (2013)
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