nep-age New Economics Papers
on Economics of Ageing
Issue of 2010‒05‒29
three papers chosen by
Claudia Villosio
LABORatorio R. Revelli

  1. Incorporating Employee Heterogeneity Into Default Rules for Retirement Plan Selection By Gopi Shah Goda; Colleen Flaherty Manchester
  2. Aging and financial planning for retirement: Interdisciplinary influences viewed through a cross-cultural lens. By Hershey, D.A.; Henkens, C.J.I.M.; Dalen, H.P. van
  3. Optimum taxation of bequests in a model with initial wealth By Johann K. Brunner; Susanne Pech

  1. By: Gopi Shah Goda; Colleen Flaherty Manchester
    Abstract: This paper examines the effect of incorporating individual-level heterogeneity into default rules for retirement plan selection. We use data from a large employer that transitioned from a defined benefit (DB) plan to a defined contribution (DC) plan, offering existing employees a choice of plans. Employees who did not make a choice were defaulted to switch to the DC plan if under age 45 or remain in the DB plan if age 45 or older. Using a regression discontinuity framework, we estimate that the default increased the probability of enrolling in one plan over the other by 60 percentage points. We develop a framework to solve for the optimal age-based default rule analytically and use our results to empirically evaluate the optimal age-based default rule for the firm in our setting. We show that for a broad range of levels of risk aversion, conditioning the default for the choice between pension plans on age can substantially improve outcomes relative to a uniform default policy. Our results suggest that considerable welfare gains are possible by varying defaults by observable characteristics.
    Date: 2010–05
  2. By: Hershey, D.A.; Henkens, C.J.I.M. (Tilburg University); Dalen, H.P. van (Tilburg University)
    Date: 2010
  3. By: Johann K. Brunner; Susanne Pech
    Abstract: We formulate an optimum-taxation model, where parents leave bequests to their descendants for altruistic reasons. In contrast to the standard model, individuals differ not only in earning abilities, but also ininitial (inherited) wealth. In this model a redistributive motive for an inheritance tax - which is equivalent to a uniform tax on all expenditures - arises, given that initial wealth increases with earning abilities. Its introduction increases intertemporal social welfare or has an ambiguous effect, depending on whether the bequeathing generation can adjust their behaviour and whether the external effect related to altruism is accounted for in the social objective.
    Date: 2010–01

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