The Choice between Pension Reform Options
Tilburg University, Center for Economic Research Discussion Paper Series No. 1998-9
Posted: 7 Jan 1999
Date Written: 1998
We evaluate the likelihood of different reforms of an unsustainable pay-as-you-go pension system. Individual agents' preferences are determined for 15 age groups and all possible levels of wealth to account for expectations held prior to a reform. Moreover, we introduce "indifference bands" in an age-savings plane to assess the robustness of our findings. Majority votes tend to favour distortionary tax increases over benefit reductions. Tax-benefit linkages and especially altruistic preferences can lead to more efficient voting outcomes. Although wealth holdings is a crucial variable in determining individual preferences, the ranking of reforms is generally not affected.
JEL Classification: H55, D91, D72
Suggested Citation: Suggested Citation