Pension income indexation: a mean-variance approach

Lluberas, Rodrigo (2019) Pension income indexation: a mean-variance approach. Economía, 20 (1). 33 - 59. ISSN 1529-7470

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Abstract

This paper proposes a theoretical framework to study pension income indexation from the retirees’ point of view. The theoretical model is then used to calculate the optimal indexation measure for different cohorts of retirees using historical data from Uruguay. The results suggest that for most of the cohorts, but particularly for those retiring in the 1970s and 1990s, the optimal strategy would be to choose the consumer price index (CPI) as the pension income indexation measure. Even for cohorts retiring after the 1989 Constitutional reform that established the average nominal earnings index (ANEI) as the indexation measure, the CPI is still the preferred indexation measure. To show the robustness of the results, two alternative criteria are used to assess the two indexation measures, with similar results.

Item Type:	Article
Official URL:	https://economia.lse.ac.uk/
Additional Information:	© 2019 LACTEA
Divisions:	LSE
Subjects:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HD Industries. Land use. Labor
JEL classification:	G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice; Investment Decisions D - Microeconomics > D1 - Household Behavior and Family Economics > D12 - Consumer Economics: Empirical Analysis D - Microeconomics > D6 - Welfare Economics > D60 - General
Date Deposited:	23 Jul 2024 13:48
Last Modified:	12 Dec 2024 04:13
URI:	http://eprints.lse.ac.uk/id/eprint/123185

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