Hidden redistribution in lifetime earnings: the role of differential mortality

We then present the results 4 on the relation between income and mortality in section 3 and the analyses on the redistribution generated by the pension system in section 4. [...] At the aggregate level, the average RC of a given cohort, in a pay- as-you-go system, will be largely determined by the growth rate of the wage bill, which is the contribution basis of the pension system (Samuelson, 1958). [...] The overall progressivity of the system is mostly driven by the extreme parts of the income distribution, as the RC is relatively flat between the 7th and 17th vintiles. [...] The magnitude of this effect is however very different and relates to the life expectancy gap observed in Figure 2: mortality differentials within men are large and their effect on the RC profile more than offsets the progressive effect of solidarity on most of the gradient. [...] Interpretation: The average return for men of the 6th vintile is lower than average : the progressive effect of the pension formula is more than offset by the effect of lower longevity.