Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/167563 
Year of Publication: 
2017
Series/Report no.: 
CESifo Working Paper No. 6577
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
Many countries, in an effort to address the problem that too many retirees have too little saved up, impose mandatory contributions into retirement accounts, that too, in an age-independent manner. This is puzzling because such funded pension schemes effectively mandate the young, who wish to borrow, to save for retirement. Further, if agents are present-biased, they disagree with the intent of such schemes and attempt to undo them by reducing their own saving or even borrowing against retirement wealth. We establish a welfare case for mandating the middle-aged and the young to contribute to their retirement accounts, even with age-independent contribution rates. We find, somewhat counterintuitively, that even though the young responds by borrowing more that too at a rate higher than offered by pension savings, their life-time utility increases.
Subjects: 
present-biased preferences
mandatory pensions
pension offsets
crowding out
JEL: 
H55
D91
D03
E60
Document Type: 
Working Paper
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