I am an applied microeconomist and public economist. My research focuses on household consumption and saving behaviour. My job market paper ‘Private Pensions and Public Pension Design’ looks at the design of public pensions. Using an estimated lifecycle model that contains public pensions, private pensions and realistic uncertainty, I find that governments should emphasise means-tested pensions more than Social Security style pensions that link the level of the pension payment to career-average earnings.
Other work has found evidence of a behavioural effect of the labelling of a government transfer (households spend a much greater proportion of ‘Winter Fuel Payment’ on household fuel than they would a neutrally-named transfer), and has studied the reasons behind the puzzling-high expenditure of those reporting the lowest income in surveys (concluding that measurement error plays a large role).
While undertaking my PhD, I have worked at the Institute for Fiscal Studies where I am currently an Associate Director. My work there has mixed academic research, grant-writing and fundraising and writing policy reports.
- Public Economics
- Household Consumption
- Social Security
- Computational economics
Government pension spending in developed countries can be divided into three types: (1) Social Security-style benefits that depend on earnings during working life, (2) subsidies of private pension saving and (3) means-tested transfers to retirees. Using an estimated lifecycle model that accounts for these each of these, as well as endogenous labour supply, private savings and realistic uncertainty, this paper investigates the optimal combination of these three approaches. I show, using an optimal taxation framework, that for countries (such as the US and the UK) that currently provide public pensions that depend on career average earnings, large welfare increases can be obtained by increasing means-tested old-age transfers balancing the budget by (any of) reducing the public pension, increasing taxes or (especially) reducing private pension subsidies. While means-tested public pensions cause distortions, I show that the costs of these are more than offset by the value of the insurance they provide against low lifetime earnings potential, poor investment returns and longevity. The optimality of greater means-tested support is specific to older individuals: I find that means-tested support given to younger households should be much lower than that provided to the elderly. These results imply that governments should provide strong work incentives for the young, but provide pensions with good insurance properties for the old.
- Richard Blundell (UCL)
- Thomas Crossley (Essex)
- Eric French (UCL)
- Hamish Low (Cambridge)