By David Blake
Whereas no longer trying to teach readers as specialist economists, this publication goals to supply a safe grounding within the idea and perform of economics insofar because it bargains with pension issues. From interpreting this publication, the consumer will comprehend: * the most important forms of pension scheme * The function of pensions in maximizing person lifetime welfare * The function of pensions in person discounts and retirement judgements * The position and outcomes of the 401-k plan from the company's point of view * The function of pensions in selling combination discounts * The function of pensions and retirement in overlapping generations versions * The economics of getting older and intergenerational accounting * The social welfare implications of pensions * the teachings of behavioural economics for pensions
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19. Explain the retirement decision when there is an unfunded state pension scheme. 20. Examine the effect of earnings tests on incentives to work after retirement. 21. Review the empirical evidence testing the validity of the LCM. 22. What is the appropriate definition of savings in the LCM? 23. Explain the Feldstein LCM with induced retirement. 24. What other factors have been shown to influence consumption in the presence of imperfect capital and labour markets? P. and Weber, G. (1997) Intertemporal consumption, durables and liquidity constraints: a cohort analysis, European Economic Review, 41, 37–59.
On the other hand, Blinder et al. (1980) argue that state pensions do not necessarily have the effect of encouraging earlier retirement, since delayed retirement after state pension age can result in a more than actuarially fair increase in the state pension. The effects differ with different social security systems, of course, and the net effect remains an empirical question for each system. The psychological research literature also offers insights. Cagan (1965), for instance, identified a recognition effect in individual behaviour.
Alternatively, if there is a trade-off between consumption and leisure, then real wages or hours worked should be included in the model, with rises in these two variables being associated with higher consumption; the unemployment rate can be used as a proxy for changes in hours worked (Barro, 1974, 1978; Burkhauser and Turner, 1982; Bayoumi, 1995). Individual Pension Decision Making 35 r Inflation rate. Because ‘nominal rather than real interest rate payments are considered to be income in the national accounts, hence in inflationary times consumers are forced to increase saving simply to keep their debt position stable’ (Bayoumi, 1993, p.