Redistributive Effects of Different Pension Structures When Longevity Varies by Socioeconomic Status in a General Equilibrium Setting

Miguel Sanchez-Romero
Ronald Lee, University of California, Berkeley
Alexia F├╝rnkranz-Prskawetz, Vienna University of Technology

Differences in life expectancy between high and low socioeconomic groups are often large and have widened in many countries in recent decades. In the US, this difference may now be as large as ten to 14 years. Such longevity gaps by socioeconomic status strongly affect the actuarial fairness and progressivity of many public pension systems, suggesting a need for policy reforms to address this issue. However, behavioral responses to longevity differences and policy change complicate the analysis of possible reforms. Here we consider how some pension reforms would perform in a general equilibrium setting when there is heterogeneity in both longevity and ability. We evaluate the redistributive effects of three Notional Defined Contribution plans and three Defined Benefit plans, calibrated on the US case, drawing on a recent National Research Council study and other information.

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 Presented in Session 200. Pensions, Social Security, and Retirement