The Dark Side of Wage Indexed Pensions
Sammanfattning
This paper investigates some welfare effects of forced saving through a mandatory pension scheme. The framework for the analysis is a life-cycle model of a borrowing constrained individual´s consumption and portfolio choice in the presence of uncertain labour income and realistically calibrated tax and pension systems.
Pension benefits stem from both a defined benefit and a notionally defined contribution part, the latter being indexed to stochastic aggregate labour income. We show that agents attribute little value to their pension savings in early life. Furthermore, we estimate the welfare loss for individuals in mid-life associated with the dependency between pension returns and labour income growth to 1.2% in annual consumption.
Universitet
Göteborg University. School of Business, Economics and Law
Samlingar
Fil(er)
Datum
2005Författare
Erlandzon, Karl
Carlsson, Evert
Nyckelord
Life-cycle; portfolio choice; pensions
Publikationstyp
Report
ISSN
1403-2465
Serie/rapportnr.
Working Papers in Economics, nr 178
Språk
en