Pensions for Whom? Redistribution of Public Pension with an Endogenous Income-Longevity Gradient
By Frederik Bjørn Christensen, Frederik Læssøe Nielsen A vast literature on public pensions shows that pay-as-you-go schemes may be preferable to funded schemes despite arguments of return dominance. A heavily cited reason for this is redistribution. One aspect that is rarely considered, however, is that the positive correlation between income and longevity may mitigate or even reverse redistribution. Augmenting a standard, heterogeneous-agent life cycle model with endogenous survival, we conduct a positive experiment and show that pension policy might not...
