Abstract
Mandatory pension systems partially replace old-age income, therefore the government matches additional life-cycle savings in a voluntary pension system. Though the individual saving decisions are apparently independent, the earmarked taxes (paid to finance the matching) connect them. Previous models either neglected the endogenous tax expenditures (e.g. Choi et al., in: Wise (ed) Perspectives in the economics of aging, University of Chicago Press, Chicago, pp 81–121, 2004) or assumed very sophisticated saving strategies (e.g. Fehr et al. in FinanzArchiv Pub Finance Anal 64:171–198, 2008). We create twin models: myopic workers learn (i) from farsighted workers using public information (analytic model) and (ii) also from each other (agent-based model). These models provide more realistic results on saving behavior and the impact of matching on the income redistribution than the earlier models.
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Notes
In a previous version, Király and Simonovits (2016) used the expression global learning for learning by using public information.
For example, in a calibrated general equilibrium model of the German economy, Fehr et al. (2008) showed that if the voluntary pillar is extended, then existing generations lose and future generations gain. In addition, the assumption of rational expectations makes the foregoing models extremely complex (for an alternative with naive expectations, see Molnár and Simonovits 1998).
For the sake of simplicity, we forbid shortsighted workers to learn from farsighted workers but as suggested personally by Botond Kőszegi, its inclusion would open the door to an alternative learning mechanism not using government-made information like \(\alpha \) and especially \(\theta \).
Note that even extending the rules to allow learning from farsighted workers would not significantly improve learning. Upon request, we can send an unpublished document showing this.
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Acknowledgements
We thank Cars Hommes, Botond Kőszegi, Gergely Varga, Tamás Vicsek, János Vincze and the anonymous referees of this Journal for their useful comments, especially for calling our attention to the imperfect formulation of the transition from zero to positive matching in Király and Simonovits (2016) which is longer and can be found on the web. We express our gratitude for the generous grant of the Hungarian Research Foundation (OTKA) under grant number 108668.
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Király, B., Simonovits, A. Learning to save in a voluntary pension system: toward an agent-based model. J Econ Interact Coord 14, 121–145 (2019). https://doi.org/10.1007/s11403-018-0218-7
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DOI: https://doi.org/10.1007/s11403-018-0218-7