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Pension reform and labor market incentives

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  • Walter Fisher
  • Christian Keuschnigg

    ()

Abstract

This paper investigates how parametric reform in a pay-as-you-go pension system with a tax benefit link affects retirement incentives and work incentives of prime-age workers. We find that postponed retirement tends to harm incentives of prime-age workers in the presence of a tax benefit link, thereby creating a policy trade-off in stimulating aggregate labor supply. We show how several popular reform scenarios are geared either towards young or old workers, or, indeed, both groups under appropriate conditions. We also provide a sharp characterization of the excess burden of pension insurance and show how it depends on the behavioral supply elasticities on the extensive and intensive margins and the effective tax rates implicit in contribution rates.

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Bibliographic Info

Article provided by Springer in its journal Journal of Population Economics.

Volume (Year): 23 (2010)
Issue (Month): 2 (March)
Pages: 769-803

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Handle: RePEc:spr:jopoec:v:23:y:2010:i:2:p:769-803

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Related research

Keywords: Pension reform; Retirement; Tax–benefit link; H55; J26;

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References

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Citations

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Cited by:
  1. Yvonne Adema & Jan Bonenkamp & Lex Meijdam, 2013. "Flexible Pension Take-up in Social Security," Tinbergen Institute Discussion Papers 13-091/VI, Tinbergen Institute.
  2. Niklas Potrafke, 2011. "Unemployment, Human Capital Depreciation and Pension Benefits: An Empirical Evaluation of German Data," Working Paper Series of the Department of Economics, University of Konstanz 2011-05, Department of Economics, University of Konstanz.
  3. Fisher, Walter H. & Keuschnigg, Christian, 2011. "Life-Cycle Unemployment, Retirement, and Parametric Pension Reform," Economics Series 267, Institute for Advanced Studies.
  4. Tim Buyse & Freddy Heylen & Renaat Van de Kerckhove, 2013. "Pension reform, employment by age, and long-run growth," Journal of Population Economics, Springer, vol. 26(2), pages 769-809, April.
  5. Sánchez-Romero, Miguel & Sambt, Jože & Prskawetz, Alexia, 2013. "Quantifying the role of alternative pension reforms on the Austrian economy," Labour Economics, Elsevier, vol. 22(C), pages 94-114.
  6. Bas, Maria & Ledezma, Ivan, 2007. "Market Access and the Evolution of within Plant Productivity in Chile," Economics Papers from University Paris Dauphine 123456789/6913, Paris Dauphine University.
  7. T. Buyse & F. Heylen & R. Van De Kerckhove, 2012. "Pension reform in an OLG model with heterogeneous abilities," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 12/810, Ghent University, Faculty of Economics and Business Administration.
  8. T. Buyse & F. Heylen & R. Van De Kerckhove, 2011. "Pension reform, employment by age, and long-run growth in OECD countries," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 11/719, Ghent University, Faculty of Economics and Business Administration.
  9. Adema, Y. & Bonenkamp, J. & Meijdam, A.C., 2013. "Flexible Pension Take-up in Social Security," Discussion Paper 2013-043, Tilburg University, Center for Economic Research.
  10. Marczok, Yvonne Maria & Amann, Erwin, 2013. "Labor demand for senior employees in the context of early retirement," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79781, Verein für Socialpolitik / German Economic Association.
  11. Iñigo Iturbe-Ormaetxe & Guadalupe Valera, 2012. "Social security reform and the support for public education," Journal of Population Economics, Springer, vol. 25(2), pages 609-634, January.
  12. Kinnunen, Helvi, 2008. "Government funds and demographic transition – alleviating ageing costs in a small open economy," Research Discussion Papers 21/2008, Bank of Finland.

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