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Promoting a higher retirement age: A prospect‐theoretical approach
Author(s) -
Domonkos Stefan
Publication year - 2015
Publication title -
international journal of social welfare
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.664
H-Index - 47
eISSN - 1468-2397
pISSN - 1369-6866
DOI - 10.1111/ijsw.12101
Subject(s) - pension , life expectancy , incentive , economics , prospect theory , retirement age , welfare , expectancy theory , statutory law , actuarial science , public economics , demographic economics , political science , sociology , microeconomics , population , finance , market economy , demography , management , law
Demographic ageing and the necessity of raising the retirement age is one of the most frequently debated topics among E uropean welfare policy experts. This study used prospect theory as developed in behavioural economics to explain public attitudes towards pension reforms. It argues that, in line with prospect theory, negative incentives are more useful in changing people's attitudes in favour of a higher statutory retirement age than are positive incentives. Therefore, in the case of increasing life expectancy, defined‐contribution schemes that apply actuarial formulae linking the level of starting monthly pension benefits to life expectancy are more useful in promoting a higher retirement age than conventional defined‐benefit schemes, which typically do not forge an automatic connection between longevity and starting pensions. The implications of prospect theory for attitudes towards pension reforms were tested using E urobarometer survey data collected in 2004 and 2009 in the C zech R epublic, P oland and S lovakia.