In this paper, we analyze how the implicit tax rate can be smoothed in a pay-as-you-go system if life expectancy increases or if the rate of population growth declines. We show that generation-specific contribution or replacement rates are necessary to smooth the implicit tax rate. Partial funding of the pension system is indispensable if the rate of population growth falls. If life expectancy increases, the contribution rate fluctuates and may not converge to a new steady state value unless funded elements are introduced.
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Article provided by Mohr Siebeck, Tübingen in its journal FinanzArchiv.
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Find related papers by JEL classification: H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy
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