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Is There a Social Security Tax Wedge?

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Author Info
Alessandro Cigno () (University of Florence, CESifo, CHILD and IZA Bonn)

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Abstract

A Beveridgean pension scheme invariably introduces a wedge between the wage rate and the marginal take-home pay. A Bismarckian one can do so only if it is not actuarially fair, or in the presence of credit rationing. Interestingly, if the two possible sources of distortion are present at the same time, they will tend to offset each other. The distortion may even change sign (the wedge may become a premium). In any case, the same pension contribution will discourage labour less if the scheme is Bismarckian, than if it is Beveridgean.

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File URL: ftp://repec.iza.org/RePEc/Discussionpaper/dp1967.pdf
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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1967.

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Length: 11 pages
Date of creation: Feb 2006
Date of revision:
Handle: RePEc:iza:izadps:dp1967

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Related research
Keywords: tax wedge; Bismarck; Beveridge; public pensions; implicit pension tax; labour;

Other versions of this item:

Find related papers by JEL classification:
H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Murphy, Kevin M & Welch, Finis, 1998. "Perspectives on the Social Security Crisis and Proposed Solutions," American Economic Review, American Economic Association, vol. 88(2), pages 142-50, May. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Kerstin Roeder, 2009. "Optimal taxes and pensions in a society with myopic agents," Working Papers 2009/28, Institut d'Economia de Barcelona (IEB). [Downloadable!]
  2. Carone, Giuseppe & Nicodème, Gaëtan & Schmidt, Jan, 2007. "Tax revenues in the European Union: Recent trends and challenges ahead," MPRA Paper 3996, University Library of Munich, Germany. [Downloadable!]
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This page was last updated on 2009-12-14.

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