Self-Control preferences and public pension analysis

We study the macroeconomic and fiscal effects of self-control preferences on household saving, labor supply, and public pension design. Building on the framework of Gul and Pesendorfer, we develop a quantitative general equilibrium overlapping generations model in which agents face temptations over both consumption and leisure. We use this model to analyze how varying degrees of self-control costs interact with key pension parameters: the taper rate (means testing), the maximum pension benefit, and the eligibility age. We find that stronger self-control preferences increase reliance on public pensions, amplifying fiscal pressure and altering labor supply patterns, particularly among older workers. Means testing can partially mitigate these effects by encouraging private saving and later retirement but involves trade-offs in taxation and welfare. By incorporating self-control preferences into a macroeconomic framework, we highlight how behavioral biases can influence the performance and fiscal impact of alternative pension policies.

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Publication Details

Journal
Journal of Economic Behavior & Organization
Published
2025-12-13
DOI
https://doi.org/10.1016/j.jebo.2025.107338
Primary Topic
Financial Literacy, Pension, Retirement Analysis
Type
article
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article

Self-Control preferences and public pension analysis

Journal of Economic Behavior & Organization
Financial Literacy, Pension, Retirement Analysis
article

Self-Control preferences and public pension analysis

article en

Abstract

We study the macroeconomic and fiscal effects of self-control preferences on household saving, labor supply, and public pension design. Building on the framework of Gul and Pesendorfer, we develop a quantitative general equilibrium overlapping generations model in which agents face temptations over both consumption and leisure. We use this model to analyze how varying degrees of self-control costs interact with key pension parameters: the taper rate (means testing), the maximum pension benefit, and the eligibility age. We find that stronger self-control preferences increase reliance on public pensions, amplifying fiscal pressure and altering labor supply patterns, particularly among older workers. Means testing can partially mitigate these effects by encouraging private saving and later retirement but involves trade-offs in taxation and welfare. By incorporating self-control preferences into a macroeconomic framework, we highlight how behavioral biases can influence the performance and fiscal impact of alternative pension policies.

Journal of Economic Behavior & OrganizationVol. 241
University of Canberra (AU), UNSW Sydney (AU), St Vincent's Clinic (AU)
Decent work and economic growth
Openalex Percentile: Top 27%
Financial Literacy, Pension, Retirement Analysis
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Self-Control preferences and public pension analysis · Journal of Economic Behavior & Organization (2025) | TGRS Research Map | TGRS