Getting Life Expectancy Estimates Right for Pension Policy: Period Versus Cohort Approach

32 Pages Posted: 21 Feb 2019

See all articles by Mercedes Ayuso

Mercedes Ayuso

University of Barcelona

Jorge Miguel Bravo

NOVA IMS

Beata Smarzynska Javorcik

University of Oxford - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: 2018

Abstract

In many policy areas it is essential to use the best estimates of life expectancy, but it is vital to most areas of pension policy. This paper presents the conceptual differences between static period and dynamic cohort mortality tables, estimates the differences in life expectancy for Portugal and Spain, and compares official estimates of both life expectancy estimates for Australia, the United Kingdom, and the United States for 1981, 2010, and 2060. These comparisons reveal major differences between period and cohort life expectancy in and between countries and across years. The implications of using wrong estimates for pension policy, including financial sustainability, are explored.

Keywords: cross-country comparison, Lee-Carter, life expectancy indexation, balancing mechanism

JEL Classification: G220, H550, J140

Suggested Citation

Ayuso, Mercedes and Bravo, Jorge Miguel and Smarzynska Javorcik, Beata, Getting Life Expectancy Estimates Right for Pension Policy: Period Versus Cohort Approach (2018). CESifo Working Paper No. 7349, Available at SSRN: https://ssrn.com/abstract=3338676

Mercedes Ayuso (Contact Author)

University of Barcelona ( email )

Av. Diagonal 690
Barcelona, E-08034
Spain
+34 934 021409 (Phone)
+34 934 021 821 (Fax)

Jorge Miguel Bravo

NOVA IMS ( email )

Campolide Campus
Lisboa, 1099-085
Portugal

Beata Smarzynska Javorcik

University of Oxford - Department of Economics ( email )

Manor Road Building
Manor Road
Oxford, OX1 3BJ
United Kingdom

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