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Torben M. Andersen

Reference-dependent preferences, time inconsistency, and pay-as-you-go pensions

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Reference-dependent preferences, time inconsistency, and pay-as-you-go pensions. / Andersen, Torben M.; Bhattacharya, Joydeep; Liu, Qing.

I: Economic Inquiry, Bind 59, Nr. 3, 07.2021, s. 1008-1030.

Publikation: Bidrag til tidsskrift/Konferencebidrag i tidsskrift /Bidrag til avisTidsskriftartikelForskningpeer review

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@article{89f148498ef144be86cc52ae97e9ba4b,
title = "Reference-dependent preferences, time inconsistency, and pay-as-you-go pensions",
abstract = "The classic Aaron–Samuelson result argues that pay-as-you-go (PAYG) pension schemes cannot coexist with higher-return, private, retirement-saving schemes. The ensuing literature shows if agents voluntarily undersave for retirement due to myopia or time-inconsistency, then a paternalistic, rationale for PAYG pensions arises only if voluntary retirement saving is fully crowded out because of a binding borrowing constraint. This paper generalizes the discussion to the reference-dependent utility setup of K{\H o}szegi and Rabin (2009) where undersaving happens naturally. No borrowing constraint is imposed. We show it is possible to offer a non-paternalistic, welfare rationale for return-dominated, PAYG pensions to coexist with private, retirement saving.",
keywords = "dynamic efficiency, K{\H o}szegi–Rabin, pensions, reference-dependence",
author = "Andersen, {Torben M.} and Joydeep Bhattacharya and Qing Liu",
note = "Publisher Copyright: {\textcopyright} 2021 The Authors. Economic Inquiry published by Wiley Periodicals LLC on behalf of Western Economic Association International.",
year = "2021",
month = jul,
doi = "10.1111/ecin.12972",
language = "English",
volume = "59",
pages = "1008--1030",
journal = "Economic Inquiry",
issn = "0095-2583",
publisher = "Wiley-Blackwell Publishing, Inc.",
number = "3",

}

RIS

TY - JOUR

T1 - Reference-dependent preferences, time inconsistency, and pay-as-you-go pensions

AU - Andersen, Torben M.

AU - Bhattacharya, Joydeep

AU - Liu, Qing

N1 - Publisher Copyright: © 2021 The Authors. Economic Inquiry published by Wiley Periodicals LLC on behalf of Western Economic Association International.

PY - 2021/7

Y1 - 2021/7

N2 - The classic Aaron–Samuelson result argues that pay-as-you-go (PAYG) pension schemes cannot coexist with higher-return, private, retirement-saving schemes. The ensuing literature shows if agents voluntarily undersave for retirement due to myopia or time-inconsistency, then a paternalistic, rationale for PAYG pensions arises only if voluntary retirement saving is fully crowded out because of a binding borrowing constraint. This paper generalizes the discussion to the reference-dependent utility setup of Kőszegi and Rabin (2009) where undersaving happens naturally. No borrowing constraint is imposed. We show it is possible to offer a non-paternalistic, welfare rationale for return-dominated, PAYG pensions to coexist with private, retirement saving.

AB - The classic Aaron–Samuelson result argues that pay-as-you-go (PAYG) pension schemes cannot coexist with higher-return, private, retirement-saving schemes. The ensuing literature shows if agents voluntarily undersave for retirement due to myopia or time-inconsistency, then a paternalistic, rationale for PAYG pensions arises only if voluntary retirement saving is fully crowded out because of a binding borrowing constraint. This paper generalizes the discussion to the reference-dependent utility setup of Kőszegi and Rabin (2009) where undersaving happens naturally. No borrowing constraint is imposed. We show it is possible to offer a non-paternalistic, welfare rationale for return-dominated, PAYG pensions to coexist with private, retirement saving.

KW - dynamic efficiency

KW - Kőszegi–Rabin

KW - pensions

KW - reference-dependence

UR - http://www.scopus.com/inward/record.url?scp=85101297419&partnerID=8YFLogxK

U2 - 10.1111/ecin.12972

DO - 10.1111/ecin.12972

M3 - Journal article

AN - SCOPUS:85101297419

VL - 59

SP - 1008

EP - 1030

JO - Economic Inquiry

JF - Economic Inquiry

SN - 0095-2583

IS - 3

ER -