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AN EXPERIMENTAL TEST ON RETIREMENT DECISIONS
Author(s) -
FATAS ENRIQUE,
LACOMBA JUAN A.,
LAGOS FRANCISCO
Publication year - 2007
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.2007.00027.x
Subject(s) - stochastic game , pension , economics , annuity , lump sum , payment , actuarial science , test (biology) , value (mathematics) , present value , life annuity , microeconomics , finance , computer science , paleontology , machine learning , biology
As part of the current debate on the reform of pension systems, this paper presents an original experimental test where subjects face three different payoff sequences with identical expected value. Two central questions are analyzed. First, whether the distribution of retirement benefits across time influences the retirement decision. And second, whether actuarially fair pension systems distort the retirement decision. The results indicate both that a lump‐sum payment rather than annuity benefits is far more effective in delaying the retirement decision and that recent reforms that encourage the link between lifetime contributions and pension benefits to delay the retirement decision should take into account timing considerations. ( JEL C91, H55, J26)