Mortality Regressivity and Pension Design

Pashchenko, Svetlana and Jang, Youngsoo and Porapakkarm, Ponpoje (2024): Mortality Regressivity and Pension Design.

Abstract

Should public policies address inequality due to heterogeneous life expectancy? Intuitively, taking short life as a disadvantage, such policies should favor those with high mortality. Yet, pension systems implicitly redistribute from low-life-expectancy to high-life-expectancy people. Moreover, this direction of redistribution is optimal from the perspective of the standard utilitarian welfare criterion. We study mortality-related redistribution in a more flexible setting. We start by establishing a formal framework for the analysis by clearly distinguishing between the redistribution along mortality and income dimensions, and thus between mortality and income progressivity. We then show that it is optimal to redistribute towards high-mortality people in two cases. First, when welfare criterion features aversion to lifetime inequality which exceeds aversion to consumption inequality. Second, when income and mortality are negatively correlated, and income redistribution tools are limited.

• Item Type: MPRA Paper
• Language: English
• Keywords: Mortality-related redistribution, Welfare criteria, Pensions, Prioritarianism
• Subjects: D - Microeconomics > D3 - Distribution > D30 - General; D - Microeconomics > D6 - Welfare Economics > D60 - General; D - Microeconomics > D6 - Welfare Economics > D63 - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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