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Mortality Regressivity and Pension Design

Author

Listed:
  • Youngsoo Jang

    (University of Queensland)

  • Svetlana Pashchenko

    (University of Georgia)

  • Ponpoje Porapakkarm

    (National Graduate Institute for Policy Studies)

Abstract

How should we compare welfare across pension systems in presence of differential mortality? A commonly used standard utilitarian criterion implicitly favors the long-lived over the short-lived. We investigate under what conditions this ranking is reversed. We clearly distinguish between the redistribution along mortality and income dimensions, and thus between mortality and income progressivity. We show that when mortality is independent of income, mortality progressivity can be optimal only when (i) there is more aversion to inequality in lifetime utilities compared to aversion to consumption inequality, (ii) life is valuable. When the short-lived tend to have lower income, mortality progressivity can be also optimal when income redistribution tools are limited. In this case, mortality progressivity is used to substitute for income progressivity.

Suggested Citation

  • Youngsoo Jang & Svetlana Pashchenko & Ponpoje Porapakkarm, 2023. "Mortality Regressivity and Pension Design," Working Papers 2023-023, Human Capital and Economic Opportunity Working Group.
    • Handle: RePEc:hka:wpaper:2023-023
    Note: M
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    mortality-related redistribution; pensions; social security; annuities; life-cycle model;
    All these keywords.

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

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