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Should Old-Age Benefits Be Earnings-Tested?

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  • Määttänen, Niku

    ()
    (ETLA - The Research Institute of the Finnish Economy)

  • Poutvaara, Panu

    ()
    (University of Munich)

Abstract

We study the welfare effects of earnings testing flat-rate old-age benefits in a quantitative overlapping generations model with idiosyncratic labor income risk. In our model economy, even a moderate earnings testing reduces individuals’ expected lifetime utility, whenever other taxes are taken into account. Moreover, it also lowers the realized lifetime utilities of those at the bottom of the lifetime utility distribution.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2616.

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Length: 29 pages
Date of creation: Feb 2007
Date of revision:
Handle: RePEc:iza:izadps:dp2616

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Keywords: means-testing; retirement; social security;

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Cited by:
  1. Kudrna, George & Woodland, Alan, 2011. "An inter-temporal general equilibrium analysis of the Australian age pension means test," Journal of Macroeconomics, Elsevier, Elsevier, vol. 33(1), pages 61-79, March.
  2. Chung Tran & Alan Woodland, 2011. "Trade-Offs in Means Tested Pension Design," ANU Working Papers in Economics and Econometrics, Australian National University, College of Business and Economics, School of Economics 2011-550, Australian National University, College of Business and Economics, School of Economics.

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