Optimal linear redistributive tax and pension systems with flexible labor supply
AbstractThe tax system redistributes labor incomes among workers, the pension system redistributes incomes from workers to pensioners. We consider a linear transfer system, where workers pay pension contributions and personal income taxes and pensioners receive proportional benefits, while workers and pensioners enjoy basic income. Every worker maximizes his discounted lifetime utility function, depending on young- and old-age consumption plus leisure. The government chooses a transfer system which maximizes the undiscounted social welfare function. Our major result is as follows: The optimal transfer system balances the efficiency of proportional pensions and the guarantee of the basic income.
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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 1233.
Length: 17 pages
Date of creation: Nov 2012
Date of revision:
personal income tax; pension system; optimal redistribution;
Find related papers by JEL classification:
- H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
- I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
- J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
- J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
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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.
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