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Second-best Properties of Implicit Social Security Taxes: Theory and Empirical Evidence

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  • Robert Fenge
  • Silke Uebelmesser
  • Martin Werding

Abstract

This paper investigates the inter-temporal structure of implicit taxes that arise in unfunded pension schemes. We demonstrate that these tax rates are declining over the life cycle. Using German micro-data for men and married women we estimate periodic wage elasticities of labour supply in order to check the second-best properties of this timing of tax rates. An efficient taxation would require to decrease the excessive implicit taxes for married women and to implement an inversely "J-shaped" tax profile for male workers. This result contradicts the standard proposal to smooth the profile of implicit tax rates across the individual life cycle

Suggested Citation

  • Robert Fenge & Silke Uebelmesser & Martin Werding, 2002. "Second-best Properties of Implicit Social Security Taxes: Theory and Empirical Evidence," CESifo Working Paper Series 743, CESifo.
    • Handle: RePEc:ces:ceswps:_743
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    Cited by:

    1. Gopi Shah Goda & John B. Shoven & Sita Nataraj Slavov, 2009. "Removing the Disincentives in Social Security for Long Careers," NBER Chapters, in: Social Security Policy in a Changing Environment, pages 21-38, National Bureau of Economic Research, Inc.
    2. Doina Maria Radulescu & Michael Stimmelmayr, 2007. "Fundamentale Steuerreformen für Deutschland: die Unternehmensteuerreform 2008, die Duale Einkommensteuer und die Einheitssteuer im Vergleich," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 76(2), pages 98-116.
    3. Rydell, Ingrid, 2005. "Equity, Justice, Interdependence: Intergenerational Transfers and the Ageing Population," Arbetsrapport 2005:5, Institute for Futures Studies.
    4. Lukach, R. & Plasmans, J.E.J., 2002. "Measuring Knowledge Spillovers using Patent Citations : Evidence from the Belgian Firm's Data," Other publications TiSEM d78bf59a-e0ff-4451-86b9-1, Tilburg University, School of Economics and Management.
    5. Martin Werding, 2005. "Survivor Benefits and the Gender Tax Gap in Public Pension Schemes: Observations from Germany," CESifo Working Paper Series 1596, CESifo.
    6. Doina Radulescu & Michael Stimmelmayr, 2010. "The welfare loss from differential taxation of sectors in Germany," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 17(2), pages 193-215, April.
    7. Breyer, Friedrich & Franz, Wolfgang & Homburg, Stefan & Schnabel, Reinhold & Wille, Eberhard, 2004. "Reform der sozialen Sicherung: Kurzfassung," EconStor Books, ZBW - Leibniz Information Centre for Economics, number 92399, July.
    8. Metzger, Christoph, 2016. "The German statutory pension scheme: Balance sheet, cross-sectional internal rates of return and implicit tax rates," FZG Discussion Papers 63, University of Freiburg, Research Center for Generational Contracts (FZG).
    9. Martin Werding & Herbert Hofmann, 2005. "The fiscal balance of children in the German tax and social system Study commissioned by the Robert Bosch Foundation," ifo Forschungsberichte, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 27, October.
    10. Gopi Shah Goda, 2007. "Implicit Social Security Tax Rates over the Life Cycle," Discussion Papers 06-021, Stanford Institute for Economic Policy Research.
    11. Friedrich Breyer & Mathias Kifmann, 2004. "The German Retirement Benefit Formula: Drawbacks and Alternatives," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 60(1), pages 63-82, April.
    12. Doina Radulescu & Michael Stimmelmayr & Doina Maria Radulescu, 2005. "Implementing a Dual Income Tax in Germany: Effects on Investment and Welfare," ifo Working Paper Series 20, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    13. Doina Maria Rădulescu & Michael Stimmelmayr, 2008. "Die Unternehmensteuerreform 2008: Eine Reformalternative für Deutschland?," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 9(1), pages 19-36, February.
    14. Martin Werding, 2005. "Survivor Benefits and the Gender Tax-Gap in Public Pension Schemes Work Incentives and Options for Reform," ifo Working Paper Series 7, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    15. Gopi Shah Goda & John Shoven & Sita Slavov, "undated". "Removing the Disincentives for Long Careers in the Social Security and Medicare Benefit Structure," Discussion Papers 08-058, Stanford Institute for Economic Policy Research.

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