Is There a Social Security Tax Wedge?
AbstractA 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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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1967.
Length: 11 pages
Date of creation: Feb 2006
Date of revision:
Publication status: published in: Labour Economics, 2008, 15 (1), 68-77
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Other versions of this item:
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-02-12 (All new papers)
- NEP-LAB-2006-02-12 (Labour Economics)
- NEP-PBE-2006-02-12 (Public Economics)
- NEP-PUB-2006-02-12 (Public Finance)
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