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Optimal Retirement and Disability Benefits with Audit

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Author Info

  • Helmuth Cremer
  • Jean-Marie Lozachmeur
  • Pierre Pestieau

Abstract

This paper studies the design of retirement and disability policies when individuals differ in both productivity and health. The second-best solution implies (downward) distortions in the (per-period) labor supply and in the choice of retirement age for some individuals, and lesser redistribution towards workers with poor health and low productivity. This problem can be mitigated when disability screening is available. Optimal disability screening involves a random component; it is never optimal to audit all individuals who claim to be disabled. The optimal audit probability strikes a balance between audit costs and benefits obtained by relaxing an otherwise binding incentive constraint.

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Bibliographic Info

Article provided by Mohr Siebeck, Tübingen in its journal FinanzArchiv.

Volume (Year): 60 (2004)
Issue (Month): 3 (September)
Pages: 278-

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Handle: RePEc:mhr:finarc:urn:sici:0015-2218(200409)60:3_278:oradbw_2.0.tx_2-o

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Web page: http://www.mohr.de/fa

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Postal: Mohr Siebeck GmbH & Co. KG, P.O.Box 2040, 72010 Tübingen, Germany
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Related research

Keywords: social security; retirement age; implicit taxation; disability screening;

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Cited by:
  1. CREMER, Helmuth & LOZACHMEUR, Jean-Marie & PESTIEAU, Pierre, . "Retirement age and health expenditures," CORE Discussion Papers RP -1934, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. CREMER, Helmuth & LOZACHMEUR, Jean-Marie & PESTIEAU, Pierre, 2006. "Disability testing and retirement," CORE Discussion Papers 2006016, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Laurence Jacquet & Dirk Van de gaer, 2013. "Politiques fiscales optimales pour les bas revenus et principe de compensation," THEMA Working Papers 2013-04, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  4. Jacquet, Laurence & Van de Gaer, Dirk, 2011. "A comparison of optimal tax policies when compensation or responsibility matter," Journal of Public Economics, Elsevier, vol. 95(11), pages 1248-1262.
  5. Kuhn, Michael & Nuscheler, Robert, 2011. "Optimal public provision of nursing homes and the role of information," Journal of Health Economics, Elsevier, vol. 30(4), pages 795-810, July.
  6. Cremer, Helmuth & Lozachmeur, Jean-Marie & Pestieau, Pierre, 2006. "Social Security and Retirement Decision: A Positive and Normative Approach," CEPR Discussion Papers 5542, C.E.P.R. Discussion Papers.

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