Author(s)
Youngsoo Jang
Svetlana Pashchenko
Ponpoje Porapakkarm

How should we compare welfare across pension systems in presence of differential mortality? A commonly used standard utilitarian criterion implicitly favors the long-lived over the short-lived. We investigate under what conditions this ranking is reversed. We clearly distinguish between the redistribution along mortality and income dimensions, and thus between mortality and income progressivity. We show that when mortality is independent of income, mortality progressivity can be optimal only when (i) there is more aversion to inequality in lifetime utilities compared to aversion to consumption inequality, (ii) life is valuable. When the short-lived tend to have lower income, mortality progressivity can be also optimal when income redistribution tools are limited. In this case, mortality progressivity is used to substitute for income progressivity.

Publication Type
Working Paper
File Description
First version, July 15, 2023
JEL Codes
G22: Insurance; Insurance Companies; Actuarial Studies
H21: Taxation and Subsidies: Efficiency; Optimal Taxation
H55: Social Security and Public Pensions
I38: Welfare and Poverty: Government Programs; Provision and Effects of Welfare Programs
Keywords
mortality-related redistribution
pensions
social security
annuities
life-cycle model