Choosing the Legal Retirement Age in Presence of Unemployment

27 Pages Posted: 21 May 2008

See all articles by Georges Casamatta

Georges Casamatta

Toulouse School of Economics (GREMAQ-CNRS); Centre for Economic Policy Research (CEPR)

Caroline De Paoli

University of Toulouse 1 - Manufacture des Tabacs; École Normale Supérieure (ENS) - Laboratoire d'Economie Theorique et Appliquee (LEA)

Multiple version iconThere are 2 versions of this paper

Date Written: April 2007

Abstract

The aim of this paper is to better understand the impact of unemployment on the design of Pay-As-You-Go pension systems, in the context of population aging. We consider a model in which people differ according to age and face in every period a given probability of becoming unemployed. We first determine the optimal pension system, which consists in a payroll tax rate, a pension benefit level and a retirement age and study its comparative statics with respect to a change of the unemployment rate and the length of life. We then characterize the issue-by-issue voting equilibrium and compare it to the optimal pension scheme. It is shown that the median voter in general chooses a retirement age lower than the optimal one as well as a higher payroll tax rate.

Keywords: retirement age, unemployment

JEL Classification: H55

Suggested Citation

Casamatta, Georges and De Paoli, Caroline, Choosing the Legal Retirement Age in Presence of Unemployment (April 2007). , Vol. , pp. -, 2007. Available at SSRN: https://ssrn.com/abstract=1135501

Georges Casamatta (Contact Author)

Toulouse School of Economics (GREMAQ-CNRS) ( email )

Manufacture des Tabacs (bât. F)
21 Allee de Brienne
31000 Toulouse
France

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Caroline De Paoli

University of Toulouse 1 - Manufacture des Tabacs ( email )

21, allée de Brienne
Toulouse, 31000
France

École Normale Supérieure (ENS) - Laboratoire d'Economie Theorique et Appliquee (LEA) ( email )

48 boulevard Jourdan
75014 Paris
France

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