TY - JOUR
T1 - On the optimality of public pensions in an economy with life-cyclers and myopes
AU - Docquier, Frédéric
PY - 2002
Y1 - 2002
N2 - In this paper, we develop a two-period overlapping generations model with two types of individuals, life-cyclers and myopes. We revisit Feldstein's problem by deriving the optimal level of social security using a social welfare function à la Samuelson (rather than à la Lerner). In opposition to the Lerner solution, our optimal pension benefit exhibits several interesting properties (dynamic efficiency, egalitarism, easy implementation). Then the opportunity to move to a partially funded system is examined. It turns out that a partially funded system ensures the equality of utility within and across generations. The effective use of funding opportunities is less a question of rate of return than a question of equal treatment of individuals.
AB - In this paper, we develop a two-period overlapping generations model with two types of individuals, life-cyclers and myopes. We revisit Feldstein's problem by deriving the optimal level of social security using a social welfare function à la Samuelson (rather than à la Lerner). In opposition to the Lerner solution, our optimal pension benefit exhibits several interesting properties (dynamic efficiency, egalitarism, easy implementation). Then the opportunity to move to a partially funded system is examined. It turns out that a partially funded system ensures the equality of utility within and across generations. The effective use of funding opportunities is less a question of rate of return than a question of equal treatment of individuals.
KW - Myopic behavior
KW - Public pensions
UR - http://www.mendeley.com/research/optimality-public-pensions-economy-lifecyclers-myopes
U2 - 10.1016/S0167-2681(01)00174-3
DO - 10.1016/S0167-2681(01)00174-3
M3 - Article
SN - 0167-2681
VL - 47
SP - 121
EP - 140
JO - Journal of Economic Behavior and Organization
JF - Journal of Economic Behavior and Organization
IS - 1
ER -