Fair retirement under risky lifetime

Fleurbaey, Marc;Leroux, Marie-Louise;Pestieau, Pierre;Ponthiere, Gregory
(2016) International Economic Review — Vol. 57, n° 1, p. 177-210 (2016)

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Authors
  • Fleurbaey, MarcPrinceton University
    Author
  • Leroux, Marie-LouiseESG-Université du Québec à Montréal
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  • Pestieau, PierreUniversité de Liège
    Author
  • Ponthiere, GregoryUniversity Paris East Créteil and Paris School of Economics
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Abstract
A premature death unexpectedly brings a life and a career to their end, leading to substantial welfare losses. We study the retirement decision in an economy with risky lifetime and compare the laissez-faire with egalitarian social optima. We consider two social objectives: (1) the maximin on expected lifetime welfare, allowing for a compensation for unequal life expectancies, and (2) the maximin on realized lifetime welfare, allowing for a compensation for unequal lifetimes. The latter optimum involves, in general, decreasing lifetime consumption profiles as well as raising the retirement age. This result is robust to the introduction of unequal life expectancies and unequal productivities
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Fleurbaey, M., Leroux, M.-L., Pestieau, P., & Ponthiere, G. (2016). Fair retirement under risky lifetime. International Economic Review, 57(1), 177-210. https://doi.org/10.1111/iere.12152 (Original work published 2016)