Longevity and Redistribution in the German Pension System

There are theoretical foundations which allow hypothesizing on a positive association of life expectancy or retirement age with income. If both cannot be falsified, the relationship of income and the internal rate of return of a public pension system is not straight forward. By application of a partially linear model to micro data from the German public pension system, it is found that neither life expectancy, nor retirement age is monotonously increasing in income, as measured in benefit claims. The relation of benefit claims and duration under the benefit spell (which determines the rate of return) depends on the set of covariates. Including pensions for disabled individuals, three out of four specifications exhibit a duration decreasing in benefit claims. JEL Klassifikation : H55, I12, H23 Schlüsselwörter : Public Pension System, Life Expectancy, Redistribution, Partially Linear Model Download/Reference : http://www.wiwi.uni-konstanz.de/forschergruppewiwi/ Longevity and Redistribution in the German Pension System Stefan Hupfeld This Version: April 4, 2006 Abstract: There are theoretical foundations which allow hypothesizing on a positive association of life expectancy or retirement age with income. If both cannot be falsified, the relationship of income and the internal rate of return of a public pension system is not straight forward. By application of a partially linear model to micro data from the German public pension system, it is found that neither life expectancy, nor retirement age is monotonously increasing in income, as measured in benefit claims. The relation of benefit claims and duration under the benefit spell (which determines the rate of return) depends on the set of covariates. Including pensions for disabled individuals, three out of four specifications exhibit a duration decreasing in benefit claims. There are theoretical foundations which allow hypothesizing on a positive association of life expectancy or retirement age with income. If both cannot be falsified, the relationship of income and the internal rate of return of a public pension system is not straight forward. By application of a partially linear model to micro data from the German public pension system, it is found that neither life expectancy, nor retirement age is monotonously increasing in income, as measured in benefit claims. The relation of benefit claims and duration under the benefit spell (which determines the rate of return) depends on the set of covariates. Including pensions for disabled individuals, three out of four specifications exhibit a duration decreasing in benefit claims.