Harsh occupations, life expectancy and social security

Abstract

Should pension provisions di¤er by occupation? We study the optimality of allowing the pension policies to di¤er by occupation when individuals di¤er in longevity and occupation, longevity is private information but occupation is observable. There is a case for di¤erentiating the pension policy by occupation when longevity is (imperfectly) correlated with occupation. The short-lived workers in the safe occupation are however made worse-o¤, more so when the social objective includes a higher social weight on short-lived individuals to redress the implicit bias towards long-lived that the unweighted utilitarian objective entails. The maximin criterion ensures equal utility for short-lived workers regardless of occupation but those in the safe occupation consume the most when young, the least when old and retire the earliest. This is achieved by taxing-often quite heavily-their savings and their earnings from prolonged activity.

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Short and long-term correlation of social security expenditure and human development: Turkish model

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