Survivor Benefits and the Gender Tax-Gap in Public Pension Schemes Work: Incentives and Options for Reform

Since its inception, the traditional form of providing survivor benefits through public pension schemes has lost much of its legitimacy. As a result of fundamental changes in marriage behaviour and the typical division of labour between married spouses, offering non-contributory benefits of this kind can not only be seen as inequitable. Since they usually substitute for non-derived pension entitlements based on the survivant spouse's own contributions, they can also lead to incentive effects, especially for married women with some degree of labour force attachment, that appear to be far from optimal. The present paper highlights this problem based on empirical estimates regarding the wage elasticities of labour supply for German females vs males and shows how it could be resolved by installing a joint annuitisation of a given couple's pension entitlements.