Underreported earnings and age-specific income redistribution in post-socialist economies
AbstractWe analyze underreported earnings and age-specific income redistribution in postsocialist economies. Pensions, other transfers and public expenditures are financed from contributions and wage taxes, respectively. We derive the reported earnings and savings from individual utility maximization, when workers overly discount the future, obtain partial satisfaction from reporting earnings, cannot be excluded from the use of public services. The government maximizes a utilitarian social welfare function, corrected for discounting and taking into account the utility of public services. An optimal proportional pension system - complemented by appropriate means-testing - provides higher welfare than any system containing a significant flat component.
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Bibliographic InfoPaper provided by Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences in its series IEHAS Discussion Papers with number 0927.
Length: 29 pages
Date of creation: Dec 2009
Date of revision:
reporting earnings; proportional (contributional) pension; flat pension; progressive wage tax; redistribution;
Find related papers by JEL classification:
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
- D91 - Microeconomics - - Intertemporal Choice - - - Intertemporal Household Choice; Life Cycle Models and Saving
This paper has been announced in the following NEP Reports:
- NEP-AGE-2010-02-27 (Economics of Ageing)
- NEP-ALL-2010-02-27 (All new papers)
- NEP-LAB-2010-02-27 (Labour Economics)
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- Andras Simonovits, 2013. "A family of simple paternalistic transfer models," IEHAS Discussion Papers 1324, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
- Andras Simonovits, 2012. "Optimal linear redistributive tax and pension systems with flexible labor supply," IEHAS Discussion Papers 1233, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
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