Article (Scientific journals)
Voting over type and generosity of a pension system when some individuals are myopic
Cremer, Helmuth; De Donder, Philippe; Maldonado, Dario et al.
2007In Journal of Public Economics, 91 (10), p. 2041-2061
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Keywords :
social security; myopia; dual-selfmodel
Abstract :
[en] This paper studies the determination through majority voting of a pension scheme when society consists of far-sighted and myopic individuals. All individuals have the same basic preferences but myopics tend to adopt a short-term view (instant gratification) when dealing with retirement saving and labor supply. Consequently, they will find themselves with low consumption after retirement and regret their insufficient savings decisions. Henceforth, when voting they tend to commit themselves into forced saving. We consider a pension scheme that is characterized by two parameters: the payroll tax rate (that determines the size or generosity of the system) and the "Bismarckian factor" that determines its redistiibutiveness. Individuals vote sequentially. We examine how the introduction of myopic agents affects the generosity and the redistributiveness of the pension system. Our main result is that a flat pension system is always chosen when all individuals are of one kind (all far-sighted or all myopic), while a less redistributive system may be chosen if society is composed of both myopic and far-sighted agents. Furthermore, while myopic individuals tend to prefer larger payroll taxes than their far-sighted counterparts, the generosity of the system does not always increase with the proportion of myopics. (c) 2007 Published by Elsevier B.V.
Research center :
CREPP - Centre de Recherche en Économie Publique et de la Population - ULiège
Disciplines :
Economic systems & public economics
Author, co-author :
Cremer, Helmuth
De Donder, Philippe
Maldonado, Dario
Pestieau, Pierre  ;  Université de Liège - ULiège > HEC - École de gestion de l'ULiège > Economie publique
Language :
English
Title :
Voting over type and generosity of a pension system when some individuals are myopic
Publication date :
November 2007
Journal title :
Journal of Public Economics
ISSN :
0047-2727
Publisher :
Elsevier Science Sa, Lausanne, Switzerland
Volume :
91
Issue :
10
Pages :
2041-2061
Peer reviewed :
Peer Reviewed verified by ORBi
Available on ORBi :
since 23 March 2012

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