Designing Benefit Rules for Flexible Retirement with or Without Redistribution
19 Pages Posted: 10 Jan 2005
Date Written: December 2004
The traditional approach to flexible retirement (e.g. NDC) neglects the impact of asymmetric information on actuarial fairness (neutrality). The mechanism design approach (e.g. Diamond, 2003) gives up the requirement of neutrality and looks for a redistributive second-best benefit-retirement-age schedule. Trying to combine the two approaches, the present paper determines the neutral (redistribution-free) second-best solution. This neutral solution is, however, often Pareto-dominated by the redistributive one.
Keywords: flexible retirement, asymmetric information, actuarial fairness (neutrality), mechanism design
JEL Classification: D82, D91, H55
Suggested Citation: Suggested Citation