Income variability and selection of the pension system

Göktuna B. Ö.

MANAGERIAL AND DECISION ECONOMICS, vol.40, no.3, pp.267-276, 2019 (SSCI) identifier identifier

  • Publication Type: Article / Article
  • Volume: 40 Issue: 3
  • Publication Date: 2019
  • Doi Number: 10.1002/mde.3000
  • Journal Name: MANAGERIAL AND DECISION ECONOMICS
  • Journal Indexes: Social Sciences Citation Index (SSCI), Scopus
  • Page Numbers: pp.267-276
  • Galatasaray University Affiliated: Yes

Abstract

This paper provides a simple two-period, game theoretic set-up with heterogeneous agents to analyse individual selection of a pension scheme by different categories of agents. Agents have been differentiated according to their income variability. We describe Bayesian equilibria and provide examples to illustrate. The design of a pension scheme requires the consent of all the population. and we have shown that differences of volatility of income contribute to the divergence regarding the decision of a pension investment alternative. We also provide support for the subsistence of unfunded scheme in economies with demographic aging and with promising returns in funded alternatives.