Fair Retirement Under Risky Lifetime

34 Pages Posted: 12 Feb 2016

See all articles by Marc Fleurbaey

Marc Fleurbaey

Princeton University - Woodrow Wilson School of Public and International Affairs

M.‐L. Leroux

University of Quebec at Montreal (UQAM)

Pierre Pestieau

University of Liege - Research Center on Public and Population Economics; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute); Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE)

Gregory Ponthiere

Paris School of Economics (PSE)

Date Written: February 2016

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, allowing for a compensation for unequal life expectancies, and (2) the maximin on realized lifetime welfare, allowing for a compensation for unequal lifetimes. The latter optimum involves, in general, decreasing lifetime consumption profiles as well as raising the retirement age. This result is robust to the introduction of unequal life expectancies and unequal productivities.

Suggested Citation

Fleurbaey, Marc and Leroux, Marie-Louise and Pestieau, Pierre and Ponthiere, Gregory, Fair Retirement Under Risky Lifetime (February 2016). International Economic Review, Vol. 57, Issue 1, pp. 177-210, 2016. Available at SSRN: https://ssrn.com/abstract=2731406 or http://dx.doi.org/10.1111/iere.12152

Marc Fleurbaey (Contact Author)

Princeton University - Woodrow Wilson School of Public and International Affairs ( email )

Princeton University
Princeton, NJ 08544-1021
United States

Marie-Louise Leroux

University of Quebec at Montreal (UQAM) ( email )

PB 8888 Station DownTown
Succursale Centre Ville
Montreal, Quebec H3C3P8
Canada

Pierre Pestieau

University of Liege - Research Center on Public and Population Economics ( email )

Boulevard du Rectorat, 7, Batiment 31
Sart-Tilman
B-4000 Liege, 4000
Belgium
+32 4 366 3108 (Phone)
+32 4 366 3106 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE) ( email )

34 Vopie Roman Pays
Louvain la Neuve
Belgium

Gregory Ponthiere

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

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