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Forced saving, redistribution, and nonlinear social security schemes

  • CREMER, Helmuth
  • De DONDER, Philippe
  • MALDONADO, Dario
  • PESTIEAU, Pierre

This paper studies the design of nonlinear social security schemes when individuals differ in productivity and in their degree of myopia. Myopic individuals may not save ‘‘enough’’ for their retirement. The welfare function is paternalistic: The rate of time preference of the farsighted is used for both types. We show that the solution does not necessarily imply forced savings for the myopics: Paternalistic considerations are mitigated by incentive effects. Numerical results suggest that as the proportion of myopic individuals increases, there is less redistribution and more forced saving, and the desirability of social security increases.

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File URL: http://dx.doi.org/10.4284/sej.2009.76.1.86
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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers RP with number 2147.

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Handle: RePEc:cor:louvrp:2147
Note: In : Southern Economic Journal, 76(1), 86-98, 2009
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  1. CREMER, Helmuth & PESTIEAU, Pierre & ROCHET, Jean-Charles, 2001. "Capital income taxation when inherited wealth is not observable," CORE Discussion Papers 2001020, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Martin Feldstein, 1982. "The Optimal Level of Social Security Benefits," NBER Working Papers 0970, National Bureau of Economic Research, Inc.
  3. CREMER, Helmuth & DE DONDER, Philippe & MALDONADO, Dario & PESTIEAU, Pierre, 2006. "Voting over type and generosity of a pension system when some individuals are myopic," CORE Discussion Papers 2006079, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. CREMER, Helmuth & PESTIEAU , Pierre & ROCHET, Jean-Charles, . "Direct versus indirect taxation: the design of the tax structure revisited," CORE Discussion Papers RP 1528, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. Ayse Imrohoroglu & Selahattin Imrohoroglu & Douglas H. Joines, 2000. "Time inconsistent preferences and Social Security," Discussion Paper / Institute for Empirical Macroeconomics 136, Federal Reserve Bank of Minneapolis.
  6. Diamond, Peter & Koszegi, Botond, 2003. "Quasi-hyperbolic discounting and retirement," Journal of Public Economics, Elsevier, vol. 87(9-10), pages 1839-1872, September.
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