Dilemmas about Pensions
AbstractThis paper looks at the general principles underlying pensions systems, and the relative merits of different kinds of system of state superannuation payments. A pay as you go system is, it is argued, usually inferior to a fully funded one. The paper presses the case for the view that redistribution is a cogent argument--perhaps the most cogent argument--for state provision, in a practical context where earnings opportunities differ between individuals. Perfect capital markets are assumed, and labour supplies are endogenous. There is some merit in a uniform state pension supported by a proportional tax on wage earnings, and its implications under two different social welfare functions are considered. But outcomes are Pareto-dominated, under each social welfare function, by a self-selection system from a continuous menu of contribution and pension rates. The least able opt for a large pension and a high tax rate, the abler for less of both. So far from state pensions being proportional to earnings, they should in fact be negatively associated with them.
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Bibliographic InfoArticle provided by Queensland University of Technology (QUT), School of Economics and Finance in its journal Economic Analysis and Policy (EAP).
Volume (Year): 32 (2002)
Issue (Month): 1 (March)
Pay as You Go; Pension;
Find related papers by JEL classification:
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
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