Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/222084 
Year of Publication: 
2020
Series/Report no.: 
CERS-IE Working Papers No. CERS-IE WP - 2020/15
Publisher: 
Hungarian Academy of Sciences, Institute of Economics, Centre for Economic and Regional Studies, Budapest
Abstract: 
Initial public pensions are indexed to the economy-wide average wages, but pensions in progress are indexed to prices, average wages or their combinations - varying across countries and periods. We create a simple overlapping cohorts framework to study the properties of indexing pensions in progress - emphasizing a neglected issue: close wage paths should imply close benefit paths even at real wage shocks. This robustness criterion of an equitable pension system is only satisfied by wage indexing, which in turn requires the adjustment of the accrual rate. To minimize the redistribution from low-earning short-lived citizens to high-earning long-lived ones, progression should be introduced.
Subjects: 
public pensions
indexation
horizontal equity
pensions in progress
JEL: 
D10
H55
Document Type: 
Working Paper

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