Myopic Behaviour and State Involvement in a Pension System: A Cross-section Study for OECD Countries
Myopic Behaviour and State Involvement in a Pension System: A Cross-section Study for OECD Countries

Summary/Abstract: The study tries to verify whether the behavioural bias called myopia actually exists in pension decisions taken by individual agents, thus justifying significant state involvement in a pension system to ensure income adequacy. The authors examine the relationship between agent participation in voluntary pension schemes and some pension system features regarding its public and mandatory character as well as its current and predicted generosity. The empirical research involves aggregated cross-sectional data for over 20 OECD countries. Regression modeling as well as agglomerative hierarchical clustering and k-means clustering is employed to test the above-mentioned relationship. The results, suggest that aggregate data do not confirm the existence of myopia on pension decisions. In countries with less generous pension systems, voluntary schemes are more popular and better covered by working population. This suggests that people adapt to the pension system in their country and take its generosity as well as the relation between public and private character into account when deciding about the participation in voluntary pension schemes. Therefore, myopia may not support a greater state’s involvement in a pension system. This refers to both public management of the pension system as well as the broad scope of obligatory pension schemes. The results do not question the role of the state in a pension system, they deliver only an argument in favor of the rationalization of this role.

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