Optimal Cap on Pension Contributions
AbstractIn our model, the government operates a mandatory proportional (contributive) pension system to substitute for the low life-cycle savings of the low-paid myopes. The socially optimal contribution rate is high (equalizing young- and old-age consumption for them), while an appropriate cap on pension contributions makes room for the saving of high-paid far-sighted workers. In our parameterization (with a Pareto earning distribution), the optimal cap can be determined but its aggregate impact is negligible.
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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 1208.
Length: 21 pages
Date of creation: Mar 2012
Date of revision:
pensions; contribution rate; contribution cap; maximum for taxable earnings;
Find related papers by JEL classification:
- H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
- H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
This paper has been announced in the following NEP Reports:
- NEP-AGE-2012-06-13 (Economics of Ageing)
- NEP-ALL-2012-06-13 (All new papers)
- NEP-LAB-2012-06-13 (Labour Economics)
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