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An inter-temporal general equilibrium analysis of the Australian age pension means test

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  • Kudrna, George
  • Woodland, Alan

Abstract

The Australian age pension is somewhat unusual among developed countries in that it is means tested against both the claimant's income and assets. While means testing of age pensions facilitates the aims of directing public pensions to those senior individuals most in need and of containing pension expenditures by governments, it also has the effect of changing the incentives of individuals to work and save. This paper examines the implications of the Australian means tested age pension for incentives of individuals to save and work, for government financial commitments and for the welfare of individuals. To this end, we develop an overlapping generations model of the Australian economy that incorporates the essential features of the Australian pension, superannuation and taxation policy settings and use it to explore the implications of several hypothetical policy changes that relax the means test of the age pension. Our results confirm that the existing means-tested, age pension represents a disincentive for some older Australians to work.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 33 (2011)
Issue (Month): 1 (March)
Pages: 61-79

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Handle: RePEc:eee:jmacro:v:33:y:2011:i:1:p:61-79

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Web page: http://www.elsevier.com/locate/inca/622617

Related research

Keywords: Retirement Pension reform Means test Dynamic OLG model;

References

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Cited by:
  1. Chung Tran & Alan Woodland, 2011. "Trade-Offs in Means Tested Pension Design," ANU Working Papers in Economics and Econometrics 2011-550, Australian National University, College of Business and Economics, School of Economics.
  2. Cho, Sang-Wook (Stanley) & Sane, Renuka, 2013. "Means-Tested Age Pensions And Homeownership: Is There A Link?," Macroeconomic Dynamics, Cambridge University Press, vol. 17(06), pages 1281-1310, September.
  3. Fehr, Hans & Uhde, Johannes, 2012. "Optimal Pension Design in General Equlibrium," Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 62024, Verein für Socialpolitik / German Economic Association.
  4. Hans Fehr & Johannes Uhde, 2013. "On the optimal design of pension systems," Empirica, Springer, vol. 40(3), pages 457-482, August.
  5. Rafal Chomik & John Piggott, 2012. "Pensions, Ageing and Retirement in Australia: Long-Term Projections and Policies," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 45(3), pages 350-361, 09.

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