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On the Heterogeneity in Longevity Among Socioeconomic Groups: Scope, Trends, and Implications for Earnings-Related Pension Schemes

33 Pages Posted: 18 Jul 2016  

Mercedes Ayuso

University of Barcelona

Jorge Miguel Bravo

NOVA IMS

Robert Holzmann

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

Abstract

Heterogeneity in longevity between socioeconomic groups is increasingly documented for developed economies and is reviewed in the paper. Heterogeneity in life expectancy disaggregated by main socioeconomic characteristics – such as age, gender, race, health, education, profession, income, and wealth – is sizable and has not declined in recent decades. The prospects for future decline are not strong, either; perhaps even to the contrary. As heterogeneity is closely linked to income or earnings (i.e., the contribution base of earnings‐related social programs such as pensions) and as heterogeneity is empirically sizable, the result is major implicit taxes for some groups – particularly the less educated and low earners – and major subsidies for other groups – particularly highly educated individuals and high‐income earners. The implications for pension reform and scheme design are substantial as taxes/subsidies counteract the envisaged effects of (i) a closer contribution‐benefit link, (ii) a later formal retirement age to address population aging, and (iii) more individual funding and private annuities to compensate for reduced public generosity.

Keywords: implicit tax, lifetime income, gender, life expectancy, implicit subsidy

JEL Classification: D9, G22, H55, J13, J14, J16

Suggested Citation

Ayuso, Mercedes and Bravo, Jorge Miguel and Holzmann, Robert, On the Heterogeneity in Longevity Among Socioeconomic Groups: Scope, Trends, and Implications for Earnings-Related Pension Schemes. IZA Discussion Paper No. 10060. Available at SSRN: https://ssrn.com/abstract=2810471

Mercedes Ayuso (Contact Author)

University of Barcelona ( email )

Av. Diagonal 690
Barcelona, E-08034
Spain
+34 934 021409 (Phone)
+34 934 021 821 (Fax)

Jorge Miguel Bravo

NOVA IMS ( email )

Campolide Campus
Lisboa, 1099-085
Portugal

Robert Holzmann

University of Malaya ( email )

University of Malaya
Kuala Lumpur, Wilayah Persekutuan 50603
Malaysia

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

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

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