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Means testing and retirement choice in Europe: a comparison of the British and Danish systems

Author

Listed:
  • James Sefton
  • Justin van de Ven
  • Martin Weale

Abstract

We develop a simulation model of household behaviour in which both the consumption/saving and labour/leisure choices are endogenous. This model is used to explore the effects of the UK and Danish state tax and benefit systems on the labour supply of workers aged 50 or over. We find that, in broad terms, differences in labour force participation can be accounted for by differences in benefit structures. Furthermore, our simulations suggest that the UK system is preferred by young people while the Danish arrangement which imposes a larger tax burden and provides larger welfare benefits is chosen by people of 50 or older. Notably, people older than 60 are in the majority in the simulated population. The Danish system does not promote notably greater equality over the lifetime, but it does underpin a higher level of consumption for people of 50 or older.

Suggested Citation

  • James Sefton & Justin van de Ven & Martin Weale, 2005. "Means testing and retirement choice in Europe: a comparison of the British and Danish systems," Fiscal Studies, Institute for Fiscal Studies, vol. 26(1), pages 83-118, March.
    • Handle: RePEc:ifs:fistud:v:26:y:2005:i:1:p:83-118
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    Citations

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    Cited by:

    1. Woodland, A., 2016. "Taxation, Pensions, and Demographic Change," Handbook of the Economics of Population Aging, in: Piggott, John & Woodland, Alan (ed.), Handbook of the Economics of Population Aging, edition 1, volume 1, chapter 0, pages 713-780, Elsevier.
    2. Aaron George Grech, 2018. "What Makes Pension Reforms Sustainable?," Sustainability, MDPI, vol. 10(8), pages 1-12, August.

    More about this item

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General

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