EconStor >
ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München >
CESifo Working Papers, CESifo Group Munich >

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10419/30564
  
Title:Pension funding and individual accounts in economies with life-cyclers and myopes PDF Logo
Authors:Fehr, Hans
Kindermann , Fabian
Issue Date:2009
Series/Report no.:CESifo working paper 2724
Abstract:The present paper studies the growth and efficiency consequences of pension funding with individual retirement accounts in a general equilibrium overlapping generations model with idiosyncratic lifespan and labor income uncertainty. We distinguish between economies with rational and hyperbolic consumers and compare the consequences of voluntary and mandatory retirement plans. Three major findings are derived in our study: First, we quantify the commitment effect of social security for myopic individuals by roughly 1 percent of aggregate resources. It is possible to recapture this commitment technology in IRAs, if those are annuitized. Second, despite the fact that our consumers have an operative bequest motive, the welfare gain from the (implicit) longevity insurance of the pension system is significant and amounts to roughly 0.5 percent of aggregate resources. However, mandatory annuitization reduces unintended bequests so that future generations are significantly hurt. Finally, our results highlight the importance of liquidity effects for social security analysis. These efficiency gains are only attainable if accounts are voluntary and not mandatory.
Subjects:individual retirement accounts
annuities
stochastic general equilibrium
hyperbolic consumers
JEL:H55
J26
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

Files in This Item:
File Description SizeFormat
607960345.pdf457.54 kBAdobe PDF
No. of Downloads: Counter Stats
Download bibliographical data as: BibTeX
Share on:http://hdl.handle.net/10419/30564

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.