may be regarded as a minimum for an individual of generation k. In that case γ⅛>0 is no longer
guaranteed or δkg should turn out to be equal to zero.
Some remarks should be made with respect to the specification of the utility function. First, consider
the variables Yk and Yh + Yt. Usually, it is assumed that an individual’s utility is determined by his
consumption. Data on consumption are not available, however, so income is used as a proxy. The
present consumption possibilities are supposed to be equal to disposable income where account is taken
of taxes paid and savings. In principle, the same holds for future consumption. However, in our survey
the development of future income could not be measured individually. Therefore, in determining the
future consumption possibilities, we only take account of changes in public pension benefits and
contributions. For a young respondent this means that it is assumed that the before tax household
income in middle age (y?) is equal to the present household income (jʃ). For a young individual the
definition of lifetime income reads:
yy = lnyy3' + .R 1lnyy+,R 2lnj0y (2)
with R a discount factor pertaining to twenty years. Ym and Y0 are defined accordingly. Further, when
estimating the utility functions (1) some additional variables are included, to wit the background
characteristics partner (0=no, 1=yes), gender (0=female, 1=male) and age.
3.2 The questionnaire
In order to estimate eqs. (1) a survey has been held among Dutch individuals, asking them to evaluate
the current and future pension system under various alternative assumptions regarding the size of the
pension benefit and the associated contribution rates. The panel used in the research is the Telepanel.
A part of this panel is not needed for the survey because in the Netherlands most people under the age
of 25 do not contribute to (private) pensions. Moreover, within a household only one individual has
been questioned, who was not necessarily the head of the household. Although only one respondent
per household has been interviewed, household income can be calculated because the respondents had
to answer several questions about the income and pension situation of a possible partner in the