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Fiscal incidence of unfunded pension system: an analytical investigation

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    Abstract

    This paper deals with the particular fiscal incidence induced by an unfunded pension system. That consists to understand how the financing and the calculus of pensions modify the transitory and long run macroeconomic dynamics. We develop an OLG model with endogenous labour supply in an economy with productive capital. A tax on the labour income is used to finance pensions. During the retirement, a part of the amount of the pension is exogenous and the other part is linked to the contributive effort during the working period. The method of analysis is not numerical but analytical. The results concern the identification of the steady state and the transitory dynamics. Then we proceed to a sensitive study of the dynamics with respect to changes of the payroll tax or the degree of contribution.

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    File URL: http://www.ofce.sciences-po.fr/pdf/dtravail/WP2005-03.pdf
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    Bibliographic Info

    Paper provided by Observatoire Francais des Conjonctures Economiques (OFCE) in its series Documents de Travail de l'OFCE with number 2005-03.

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    Date of creation: 2005
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    Handle: RePEc:fce:doctra:0503

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    Keywords: monetary retirement; labor income tax; OLG models.;

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    1. Erosa, Andres & Gervais, Martin, 2002. "Optimal Taxation in Life-Cycle Economies," Journal of Economic Theory, Elsevier, vol. 105(2), pages 338-369, August.
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    7. repec:cup:macdyn:v:8:y:2004:i:5:p:582-95 is not listed on IDEAS
    8. Calvo, Guillermo A & Obstfeld, Maurice, 1988. "Optimal Time-Consistent Fiscal Policy with Finite Lifetimes," Econometrica, Econometric Society, vol. 56(2), pages 411-32, March.
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    14. Galor, Oded, 1992. "A Two-Sector Overlapping-Generations Model: A Global Characterization of the Dynamical System," Econometrica, Econometric Society, vol. 60(6), pages 1351-86, November.
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    16. repec:hal:cesptp:halshs-00270290 is not listed on IDEAS
    17. Hairault, Jean-Olivier & Langot, Francois, 2008. "Inequality and social security reforms," Journal of Economic Dynamics and Control, Elsevier, vol. 32(2), pages 386-410, February.
    18. Mountford, Andrew, 2004. "Global Analysis Of An Overlapping Generations Economy With Land," Macroeconomic Dynamics, Cambridge University Press, vol. 8(05), pages 582-595, November.
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