Preferences for Redistribution and Pensions: What Can We Learn from Experiments?

44 Pages Posted: 2 Aug 2010

See all articles by Franziska Tausch

Franziska Tausch

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods

Johannes (Jan) J. M. Potters

Tilburg University - CentER

Arno Riedl

Maastricht University; IZA Institute of Labor Economics; CESifo (Center for Economic Studies and Ifo Institute)

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Abstract

Redistribution is an inevitable feature of collective pension schemes and economic experiments have revealed that most people have a preference for redistribution that is not merely inspired by self-interest. Interestingly, little is known on how these preferences interact with preferences for different pension schemes. In this paper we review the experimental evidence on preferences for redistribution and suggest some links to redistribution through pensions. For that purpose we distinguish between three types of situations. The first deals with distributional preferences behind a veil of ignorance. In the second type of situation, individuals make choices in front of the veil of ignorance and know their position. Finally, we discuss situations in which income is determined by interdependent rather than individual choices. In the closing parts of the paper we discuss whether and how these experimental results speak to the redistribution issues of pensions. For example, do they argue for or against mandatory participation? Should we have less redistribution and more actuarial fairness? How does this depend on the type of redistribution involved?

Keywords: redistribution, fairness, pension, insurance, experiment

JEL Classification: C90, D01, D03, D63, D64, H55

Suggested Citation

Tausch, Franziska and Potters, Johannes (Jan) J. M. and Riedl, Arno M., Preferences for Redistribution and Pensions: What Can We Learn from Experiments?. IZA Discussion Paper No. 5090. Available at SSRN: https://ssrn.com/abstract=1651715

Franziska Tausch (Contact Author)

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods ( email )

Kurt-Schumacher-Str. 10
D-53113 Bonn, 53113
Germany

Johannes (Jan) J. M. Potters

Tilburg University - CentER ( email )

Department of Economics
P.O. Box 90153
5000 LE Tilburg
Netherlands
+31 13 466 8204 (Phone)
+31 13 466 3042 (Fax)

Arno M. Riedl

Maastricht University ( email )

Department of Economics (AE1)
P.O. Box 616
Maastricht, 6200 MD
Netherlands

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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