Inequality, life expectancy, and the alienation effect: Insights from a real-effort experiment on the intragenerational redistribution puzzle

Abstract

In most OECD countries, pension reform policy has decreased the level of intragenerational redistribution in the public pension system over the last three decades, that is, redistribution among members of the same generation with high and low pension entitlements. This trend has occurred despite heterogeneity in life expectancy linked to socioeconomic status having a regressive impact on outcomes. We propose a model that explains this empirical puzzle through the ‘alienation’ of society from low-income earners and successfully test the model in a real-effort experiment.