Improving the Equity-Efficiency Trade-Off: Mandatory Savings Accounts for Social Insurance

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Improving the Equity-Efficiency Trade-Off: Mandatory Savings Accounts for Social Insurance

Author Info

A. Lans Bovenberg (Tilburg University)
Peter Birch Sørensen (Economic Policy Research Unit, Institute of Economics, University of Copenhagen)

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Ary Lans Bovenberg

Abstract

In the modern welfare state a substantial part of an individual’s tax bill is transferred back to the same individual taxpayer in the form of social transfers. This provides a rationale for financing part of social insurance through mandatory savings accounts. We analyze the behavioral and welfare effects of compulsory savings accounts in an intertemporal model with uncertainty, endogenous involuntary unemployment and retirement decisions, credit constraints, and heterogeneous agents. We show that the introduction of (early) retirement and unemployment accounts generates a Pareto improvement by enabling the government to provide lifetime income insurance and liquidity insurance ina more effcient manner.

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Paper provided by Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics in its series EPRU Working Paper Series with number 03-07.

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Length: 42 pages
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Date of revision: Aug 2003
Handle: RePEc:kud:epruwp:03-07

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Article
- A. Lans Bovenberg & Peter Birch Sørensen, 2004. "Improving the Equity-Efficiency Trade-Off: Mandatory Savings Accounts for Social Insurance," International Tax and Public Finance, Springer, vol. 11(4), pages 507-529, 08. [Downloadable!]
- A. Bovenberg & Peter Sørensen, 2004. "Improving the Equity-Efficiency Trade-Off: Mandatory Savings Accounts for Social Insurance," Asia-Pacific Financial Markets, Springer, vol. 11(4), pages 507-529, August. [Downloadable!] (restricted)
Paper
- Lans Bovenberg & Peter Birch Sorensen, 2003. "Improving the Equity-Efficiency Trade-off: Mandatory Savings Accounts for Social Insurance," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]

This paper has been announced in the following NEP Reports:

NEP-ALL-2003-08-17 (All new papers)

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.:

Joseph Stiglitz & Jungyoll Yun, 2002. "Integration of Unemployment Insurance with Retirement Insurance," NBER Working Papers 9199, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Other versions:
- Joseph Stiglitz & Jungyoll Yun, 2002. "Integration of unemployment insurance with retirement insurance," Discussion Papers 0203-04, Columbia University, Department of Economics. [Downloadable!]
- Stiglitz, Joseph E. & Yun, Jungyoll, 2005. "Integration of unemployment insurance with retirement insurance," Journal of Public Economics, Elsevier, vol. 89(11-12), pages 2037-2067, December. [Downloadable!] (restricted)
Orszag, Mike & Snower, Dennis J., 1997. "Expanding the Welfare System: A Proposal for Reform," CEPR Discussion Papers 1674, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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Heckman, James J, 1993. "What Has Been Learned about Labor Supply in the Past Twenty Years?," American Economic Review, American Economic Association, vol. 83(2), pages 116-21, May. [Downloadable!] (restricted)
Pauly, Mark V, 1974. "Overinsurance and Public Provision of Insurance: The Roles of Moral Hazard and Adverse Selection," The Quarterly Journal of Economics, MIT Press, vol. 88(1), pages 44-62, February. [Downloadable!] (restricted)
Brunner, Johann K., 1996. "Transition from a pay-as-you-go to a fully funded pension system: The case of differing individuals and intragenerational fairness," Journal of Public Economics, Elsevier, vol. 60(1), pages 131-146, April. [Downloadable!] (restricted)
Greenwald, Bruce C & Stiglitz, Joseph E, 1986. "Externalities in Economies with Imperfect Information and Incomplete Markets," The Quarterly Journal of Economics, MIT Press, vol. 101(2), pages 229-64, May. [Downloadable!] (restricted)
BELAN, Pascal & PESTIEAU, Pierre, 1997. "Privatizing social security: a critical assessment," CORE Discussion Papers 1997084, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
Other versions:
- Pascal Belan & Pierre Pestieau, 1999. "Privatizing Social Security: A Critical Assessment," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan Journals, vol. 24(1), pages 114-130, January. [Downloadable!] (restricted)
Fölster, Stefan & Gidehag, Robert & Orszag, Mike & Snower, Dennis J., 2002. "Assessing Welfare Accounts," CEPR Discussion Papers 3479, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
Other versions:
- Fölster, Stefan & Gidehag, Robert & Orszag, Mike & Snower, Dennis, 2002. "Assessing Welfare Accounts," IZA Discussion Papers 533, Institute for the Study of Labor (IZA). [Downloadable!]
Lans Bovenberg & Peter Birch Sorensen, 2003. "Improving the Equity-Efficiency Trade-off: Mandatory Savings Accounts for Social Insurance," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
Other versions:
- A. Lans Bovenberg & Peter Birch Sørensen, . "Improving the Equity-Efficiency Trade-Off: Mandatory Savings Accounts for Social Insurance," EPRU Working Paper Series 03-07, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics, revised Aug 2003. [Downloadable!]
- A. Lans Bovenberg & Peter Birch Sørensen, 2004. "Improving the Equity-Efficiency Trade-Off: Mandatory Savings Accounts for Social Insurance," International Tax and Public Finance, Springer, vol. 11(4), pages 507-529, 08. [Downloadable!]
- A. Bovenberg & Peter Sørensen, 2004. "Improving the Equity-Efficiency Trade-Off: Mandatory Savings Accounts for Social Insurance," Asia-Pacific Financial Markets, Springer, vol. 11(4), pages 507-529, August. [Downloadable!] (restricted)

Full references

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.)

A. Lans Bovenberg & Peter Birch Sørensen, . "Optimal Taxation and Social Insurance in a Lifetime Perspective," EPRU Working Paper Series 06-01, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics. [Downloadable!]
Other versions:
- Bovenberg, A.L. & Sorensen, P.B., 2007. "Optimal Taxation and Social Insurance in a Lifetime Perspective," Discussion Paper 2007-14, Tilburg University, Center for Economic Research. [Downloadable!]
- Lans Bovenberg & Peter Birch Sørensen, 2006. "Optimal Taxation and Social Insurance in a Lifetime Perspective," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
R.A. de Mooij, 2004. "Towards efficient unemployment insurance in the Netherlands," CPB Memoranda 100, CPB Netherlands Bureau for Economic Policy Analysis. [Downloadable!]
A. Bovenberg & Peter Sørensen, 2004. "Improving the Equity-Efficiency Trade-Off: Mandatory Savings Accounts for Social Insurance," Asia-Pacific Financial Markets, Springer, vol. 11(4), pages 507-529, August. [Downloadable!] (restricted)
Other versions:
- Lans Bovenberg & Peter Birch Sorensen, 2003. "Improving the Equity-Efficiency Trade-off: Mandatory Savings Accounts for Social Insurance," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
- A. Lans Bovenberg & Peter Birch Sørensen, . "Improving the Equity-Efficiency Trade-Off: Mandatory Savings Accounts for Social Insurance," EPRU Working Paper Series 03-07, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics, revised Aug 2003. [Downloadable!]
- A. Lans Bovenberg & Peter Birch Sørensen, 2004. "Improving the Equity-Efficiency Trade-Off: Mandatory Savings Accounts for Social Insurance," International Tax and Public Finance, Springer, vol. 11(4), pages 507-529, 08. [Downloadable!]
Peter Birch Sørensen & Martin Ino Hansen & A. Lans Bovenberg, 2006. "Savings Accounts and the Life-Cycle Approach to Social Insurance," EPRU Working Paper Series 06-03, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics. [Downloadable!]
A. Bovenberg & Martin Hansen & Peter Sørensen, 2008. "Individual savings accounts for social insurance: rationale and alternative designs," International Tax and Public Finance, Springer, vol. 15(1), pages 67-86, February. [Downloadable!] (restricted)

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