Myopia, redistribution and pensions

Cremer, Helmuth; Pestieau, Pierre

doi:10.1016/j.euroecorev.2010.07.002

Cited by 54 publications

(40 citation statements)

References 28 publications

(15 reference statements)

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“…In other words, the social planner must choose in what period the individual reveals his "true" preferences. For example, Cremer et al (2008) and Cremer and Pestieau (2011) design an optimal forced savings scheme when some individuals are myopic (δ = 0). Forced savings are optimal because the social planner disagrees with individuals' rate of time discounting.…”

Section: Literature and The Rationale For Self-control Preferencesmentioning

confidence: 99%

Optimal redistributive pensions and the cost of self-control

St-Amant

Garon

2014

Int Tax Public Finance

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We examine how the introduction of self-control preferences influences the tradeoff between two fundamental components of a public pension system: the contribution rate and its degree of redistribution. The pension regime affects individuals' welfare by altering how yielding to temptation (i.e., not saving, or saving less) is attractive. We show that proportional taxation increases the cost of self-control, and that this adverse effect is more acute when public pensions become more redistributive.

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Section: Literature and The Rationale For Self-control Preferencesmentioning

confidence: 99%

Optimal redistributive pensions and the cost of self-control

St-Amant

Garon

2014

Int Tax Public Finance

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“…This framework gives rise to paternalistic taxation motives, as individuals do not foresee the habit formation relation when taking consumption and savings decisions. Similar effects arise when myopic habit formation is introduced into a model of retirement; see Cremer and Pestieau (2011). The present paper is different in several key aspects, as we focus on labor and savings taxation and study time-consistent decision makers that anticipate their future preferences.…”

Section: Related Literaturementioning

confidence: 99%

Optimal taxation in a habit formation economy

Koehne

Kuhn

2015

Journal of Public Economics

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Optimal Taxation in a Habit Formation Economy Terms of use: Documents in EconStor may AbstractWe study implications of habit formation for optimal taxation. First, we show that taxation problems with habit formation can be analyzed using dynamic programming techniques. Second, we derive optimal labor and savings wedges for habit formation preferences. We show that habit formation counteracts the conventional Mirrleesian distortions and calls for subsidies to labor supply and savings. We demonstrate that the theoretical results are quantitatively important: in a stylized life-cycle model, average labor and savings wedges fall by more than one third compared to time-separable references. Third, we exploit the analogy between habit formation and durable consumption to study the taxation of durable and nondurable commodities.JEL-Code: D820, E210, H210.

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“…For example, standard models of efficient compensation arrangements by competitive firms (as in Rosen 1974), predict that employers will provide benefits when firms can purchase goods or services more cost-effectively than employees, and will provide the optimal package that their workers will value most highly. 2 Similarly, models of purely paternalistic firms that incorporate individual optimization frictions predict that firms will provide their employees with optimal retirement savings plans, taking into account their employees' suboptimal behavior (Choi et al 2003;Cremer et al 2008;Carroll et al 2009;Cremer and Pestieau 2011;Goda and Manchester 2013;Roeder 2014;Fadlon and Laibson 2016) However, firms' incentives or ability to represent their employees' savings interests may be weakened for a variety of reasons. First, if employees are inattentive or "unsophisticated" (in the sense that they are not aware of their suboptimal decision making), they may fail to recognize the value of firms' choices on their behalf.…”

Section: Introductionmentioning

confidence: 99%

Do Employer Pension Contributions Reflect Employee Preferences? Evidence from a Retirement Savings Reform in Denmark

Fadlon

Laird

Nielsen

2016

American Economic Journal: Applied Economics

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This paper studies how firms set contributions to employer-provided 401(k)-type pension plans. Using a reform that decreased the subsidy to contributions to capital pension accounts for Danish workers in the top income tax bracket, we provide strong evidence that employers' contributions are based on their employees' savings preferences. We find an immediate decrease in employer contributions to capital accounts, whose magnitude increased in the share of employees directly affected by the reform. This response was large relative to average employee responses within private IRA-type plans and was accompanied by a similar-magnitude shift of employer contributions to annuity accounts. I IntroductionWith the decline in the prevalence of defined-benefit pension plans, individual savings in defined-contribution accounts are becoming an increasingly important income source for post-retirement consumption. A large and growing portion of savings balances in definedcontribution accounts is within employer-sponsored pension plans, such as 401(k)s. 1 Recent research has underlined the important role that employers' decisions play in determining employees' actual savings within employer-sponsored accounts, since most workers do not actively deviate from the default options which are set by their employer (Madrian and Shea 2001;Choi et al. 2004; Choi, Laibson, and Madrian 2007;Beshears et al. 2009;Gelber Correspondence to: Torben Heien Nielsen, thn@econ.ku.dk. 1 In 2014, 35 percent ($8.3 trillion) of retirement assets in the US were held in defined-benefit plans, while a much larger share of 58 percent ($13.8 trillion) was held in defined-contribution accounts: 30 percent in Individual Retirement Accounts (IRAs) and 28 percent in employer-sponsored plans, mostly 401(k)s (Choi 2015). HHS Public AccessAuthor manuscript Am Econ J Appl Econ. Author manuscript; available in PMC 2016 November 30. Author Manuscript Author ManuscriptAuthor Manuscript Author Manuscript 2011). The impact of employers' decisions has also been found to translate into large effects on individuals' overall level of savings (Chetty et al. 2014). This research has led policymakers to consider introducing policies that encourage employer contributions to pension accounts in order to increase individuals' retirement savings (Beshears et al. 2010).But how effectively private firms represent their employees' savings interests remains an open question. In theory, both standard models and models of altruistic planners suggest that firms should have incentives to make efficient savings choices on their workers' behalf. For example, standard models of efficient compensation arrangements by competitive firms (as in Rosen 1974), predict that employers will provide benefits when firms can purchase goods or services more cost-effectively than employees, and will provide the optimal package that their workers will value most highly. 2 Similarly, models of purely paternalistic firms that incorporate individual optimization frictions predict that firms will provi...

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Myopia, redistribution and pensions

Cited by 54 publications

References 28 publications

Optimal redistributive pensions and the cost of self-control

Optimal redistributive pensions and the cost of self-control

Optimal taxation in a habit formation economy

Do Employer Pension Contributions Reflect Employee Preferences? Evidence from a Retirement Savings Reform in Denmark

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