Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/176705
Authors: 
Makarski, Krzysztof
Tyrowicz, Joanna
Year of Publication: 
2018
Series/Report no.: 
IAAEU Discussion Paper Series in Economics 04/2018
Abstract: 
We develop an OLG model with realistic assumptions about longevity to analyze the welfare effects of raising the retirement age. We look at a scenario where an economy has a pay-as-you-go defined benefit scheme and compare it to a scenario with defined contribution schemes (funded or notional). We show that, initially, in both types of pension system schemes the majority of welfare effects comes from adjustments in taxes and/or prices. After the transition period, welfare effects are predominantly generated by the preference for smoothing inherent in many widely used models. We also show that although incentives differ between defined benefit and defined contribution systems, the welfare effects are of comparable magnitude under both schemes. We provide an explanation for this counter-intuitive result.
Subjects: 
longevity
PAYG
retirement age
pension system reform
welfare
JEL: 
C68
E21
J11
H55
Document Type: 
Working Paper

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