Social Insurance and the Public Budget
AbstractRestraints on the public budget may limit the ability of the public sector to use financial markets for the diversification of shocks. This interferes with the role of the public budget as a buffer which may provide insurance by stabilizing income and thereby private consumption. We consider this insurance or stabilizing role of public budgets and show why pro-cyclical budgets and a progressive taxation system may be optimal even when tax distortions are taken into account. Balanced budget restrictions interfere with this insurance effect, and they do not necessarily imply that a lower level of public consumption is optimal. Copyright 2002 by The London School of Economics and Political Science
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Bibliographic InfoArticle provided by London School of Economics and Political Science in its journal Economica.
Volume (Year): 69 (2002)
Issue (Month): 275 (August)
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- Torben Andersen, 2005. "Is there a Role for an Active Fiscal Stabilization Policy?," CESifo Working Paper Series 1447, CESifo Group Munich.
- Torben Andersen, 2006. "Increasing Longevity and Social Security Reforms," CESifo Working Paper Series 1789, CESifo Group Munich.
- Andersen, Torben M & Spange, Morten, 2002.
"International Interdependencies in Fiscal Stabilization Policies,"
CEPR Discussion Papers
3580, C.E.P.R. Discussion Papers.
- Andersen, Torben M. & Spange, Morten, 2006. "International interdependencies in fiscal stabilization policies," European Economic Review, Elsevier, vol. 50(5), pages 1169-1195, July.
- Torben Andersen, 2005. "Social Security and Longevity," CESifo Working Paper Series 1577, CESifo Group Munich.
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