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Title: Linking pensions to life expectancy: tackling conceptual uncertainty through Bayesian Model Averaging
Author: Bravo, Jorge Miguel
Ayuso, Mercedes
Keywords: Jubilació
Pensions a la vellesa
Esperança de vida
Old age pensions
Life expectancy
Issue Date: 2021
Publisher: MDPI
Abstract: Linking pensions to longevity developments at retirement age has been one of the most common policy responses of pension schemes to aging populations. The introduction of automatic stabilizers is primarily motivated by cost containment objectives, but there are other dimensions of welfare restructuring in the politics of pension reforms, including recalibration, rationalization, and blame avoidance for unpopular policies that involve retrenchments. This paper examines the policy designs and implications of linking entry pensions to life expectancy developments through sustainability factors or life expectancy coefficients in Finland, Portugal, and Spain. To address conceptual and specification uncertainty in policymaking, we propose and apply a Bayesian model averaging approach to stochastic mortality modeling and life expectancy computation. The results show that: (i) sustainability factors will generate substantial pension entitlement reductions in the three countries analyzed; (ii) the magnitude of the pension losses depends on the factor design; (iii) to offset pension cuts and safeguard pension adequacy, individuals will have to prolong their working lives significantly; (iv) factor designs considering cohort longevity markers would have generated higher pension cuts in countries with increasing life expectancy gap.
Note: Reproducció del document publicat a:
It is part of: Mathematics, 2021, vol. 9, num. 24, p. 3307
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ISSN: 2227-7390
Appears in Collections:Articles publicats en revistes (Econometria, Estadística i Economia Aplicada)

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