IDEAS home Printed from https://ideas.repec.org/p/gra/wpaper/21-16.html
   My bibliography  Save this paper

Introducing an Austrian Backpack in Spain

Author

Listed:
  • Julian Diaz Saavedra

    (Department of Economic Theory and Economic History, University of Granada.)

  • Ramon Marimon

    (European University Institute, UPF - Barcelona GSE, CEPR and NBER.)

  • Joao Brogueira de Sousa

    (Nova School of Business and Economics.)

Abstract

In an overlapping generations economy with incomplete insurance markets, the introduction of an employment fund – akin to the one introduced in Austria in 2003, also known as ‘Austrian backpack’– can enhance production efficiency and social welfare. It complements the two classical systems of public insurance: pay-as-you-go (PAYG) pensions and unemployment insurance (UI).We show this in a calibrated dynamic general equilibrium model with heterogeneous agents of the Spanish economy in 2018. A ‘backpack’ (BP) employment fund is an individual (across jobs) transferable fund, which earns the economy interest rate as a return and is financed with a payroll tax (a BP tax). The worker can use the fund when becomes unemployed or retires. In Spain, as an open economy, to complement the existing PAYG pension and UI systems with a welfare maximising 6% BP tax would raise welfare by 0.96% of average consumption at the new steady state, and would be preferred to the status quo by most economic and demographic groups. We also analyze, as a reference, Spain as a closed economy. There are important general equilibrium effects and, as a result, the social value of introducing the backpack is substantially greater; 16.14%, with a BP tax of 18%. Our model also provides a framework where to study reforms of existing social protection systems supported by the introduction of the BP.

Suggested Citation

  • Julian Diaz Saavedra & Ramon Marimon & Joao Brogueira de Sousa, 2021. "Introducing an Austrian Backpack in Spain," ThE Papers 21/16, Department of Economic Theory and Economic History of the University of Granada..
  • Handle: RePEc:gra:wpaper:21/16
    as

    Download full text from publisher

    File URL: http://www.ugr.es/~teoriahe/RePEc/gra/wpaper/thepapers21_16.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Brindusa Anghel & Henrique Basso & Olympia Bover & José María Casado & Laura Hospido & Mario Izquierdo & Ivan A. Kataryniuk & Aitor Lacuesta & José Manuel Montero & Elena Vozmediano, 2018. "Income, consumption and wealth inequality in Spain," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 9(4), pages 351-387, November.
    2. Julián Díaz-Saavedra & Ramon Marimon & João Brogueira de, 2023. "A Worker’s Backpack as an Alternative to PAYG Pension Systems," Journal of the European Economic Association, European Economic Association, vol. 21(5), pages 1944-1993.
    3. Ofer Setty, 2017. "Unemployment Insurance and Unemployment Accounts: The Best of Both Worlds," Journal of the European Economic Association, European Economic Association, vol. 15(6), pages 1302-1340.
    4. Zweimüller, Josef & Kettemann, Andreas & Kramarz, Francis, 2017. "Job Mobility and Creative Destruction: Flexicurity in the Land of Schumpeter," CEPR Discussion Papers 12112, C.E.P.R. Discussion Papers.
    5. Krusell, Per & Mukoyama, Toshihiko & Rogerson, Richard & Sahin, Aysegül, 2011. "A three state model of worker flows in general equilibrium," Journal of Economic Theory, Elsevier, vol. 146(3), pages 1107-1133, May.
    6. Martin Feldstein, 2005. "Rethinking Social Insurance," American Economic Review, American Economic Association, vol. 95(1), pages 1-24, March.
    7. Ramon Marimon, 2017. "On the Design of a European Unemployment Insurance Mechanism," 2017 Meeting Papers 1042, Society for Economic Dynamics.
    8. Martin Feldstein & Daniel Altman, 2007. "Unemployment Insurance Savings Accounts," NBER Chapters, in: Tax Policy and the Economy, Volume 21, pages 35-64, National Bureau of Economic Research, Inc.
    9. Ábrahám, Árpád & Brogueira de Sousa, João & Marimon, Ramon & Mayr, Lukas, 2023. "On the design of a European Unemployment Insurance System," European Economic Review, Elsevier, vol. 156(C).
    10. Auerbach, Alan J & Kotlikoff, Laurence J, 1987. "Evaluating Fiscal Policy with a Dynamic Simulation Model," American Economic Review, American Economic Association, vol. 77(2), pages 49-55, May.
    11. Conde Ruiz, José Ignacio. & Felgueroso, Florentino. & García Pérez, Jose Ignacio., 2011. "El fondo de capitalización a la austriaca: costes y beneficios de su implantación en España," Economic Reports 06-2011, FEDEA.
    12. Etienne Lalé & Linas Tarasonis, 2020. "The Life-cycle Profile of Worker Flows in Lithuania," Bank of Lithuania Occasional Paper Series 32, Bank of Lithuania.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Julián Díaz-Saavedra & Ramon Marimon & João Brogueira de, 2023. "A Worker’s Backpack as an Alternative to PAYG Pension Systems," Journal of the European Economic Association, European Economic Association, vol. 21(5), pages 1944-1993.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Julián Díaz-Saavedra & Ramon Marimon & João Brogueira de, 2023. "A Worker’s Backpack as an Alternative to PAYG Pension Systems," Journal of the European Economic Association, European Economic Association, vol. 21(5), pages 1944-1993.
    2. Robert Shimer & Ivan Werning, 2008. "Liquidity and Insurance for the Unemployed," American Economic Review, American Economic Association, vol. 98(5), pages 1922-1942, December.
    3. Beetsma, Roel & Cimadomo, Jacopo & van Spronsen, Josha, 2024. "One scheme fits all: A central fiscal capacity for the EMU targeting eurozone, national and regional shocks," European Economic Review, Elsevier, vol. 165(C).
    4. Roel Beetsma & Simone Cima & Jacopo Cimadomo, 2021. "Fiscal Transfers without Moral Hazard?," International Journal of Central Banking, International Journal of Central Banking, vol. 17(3), pages 95-153, September.
    5. Cirelli, Fernando & Espino, Emilio & Sánchez, Juan M., 2021. "Designing unemployment insurance for developing countries," Journal of Development Economics, Elsevier, vol. 148(C).
    6. Christian Jaag & Christian Keuschnigg & Mirela Keuschnigg, 2010. "Pension reform, retirement, and life-cycle unemployment," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 17(5), pages 556-585, October.
    7. Keuschnigg, Christian & Fisher, Walter, 2011. "Life-Cycle Unemployment, Retirement and Parametric Pension Reform," Economics Working Paper Series 1119, University of St. Gallen, School of Economics and Political Science.
    8. J. Ignacio Conde-Ruiz & Manu García, 2019. "Retos Laborales pendientes tras la Gran Recesión," Studies on the Spanish Economy eee2019-06, FEDEA.
    9. 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.
    10. Elsby, Michael W.L. & Hobijn, Bart & Şahin, Ayşegül, 2015. "On the importance of the participation margin for labor market fluctuations," Journal of Monetary Economics, Elsevier, vol. 72(C), pages 64-82.
    11. Jochen Mankart & Rigas Oikonomou, 2017. "Household Search and the Aggregate Labour Market," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 84(4), pages 1735-1788.
    12. Robert Hartwig & Greg Niehaus & Joseph Qiu, 2020. "Insurance for economic losses caused by pandemics," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 45(2), pages 134-170, September.
    13. Tran, Chung & Wende, Sebastian, 2021. "On the marginal excess burden of taxation in an overlapping generations model," Journal of Macroeconomics, Elsevier, vol. 70(C).
    14. Heer, Burkhard & Polito, Vito & Wickens, Michael R., 2020. "Population aging, social security and fiscal limits," Journal of Economic Dynamics and Control, Elsevier, vol. 116(C).
    15. Robert J. Shiller, 2005. "The Life-Cycle Personal Accounts Proposal for Social Security: An Evaluation," Cowles Foundation Discussion Papers 1504, Cowles Foundation for Research in Economics, Yale University.
    16. 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;International Institute of Public Finance, vol. 11(4), pages 507-529, August.
    17. Martin Kerndler & Michael Reiter, 2020. "Wage Rigidities and Old-Age Unemployment," EconPol Policy Brief 22, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    18. Kollmann, Robert, 2022. "A tractable overlapping generations structure for quantitative DSGE models," Economics Letters, Elsevier, vol. 221(C).
    19. Yoonkyo Cho & Taehwan Kim & Jaewhak Roh, 2021. "An analysis of the effects of electronic commerce on the Korean economy using the CGE model," Electronic Commerce Research, Springer, vol. 21(3), pages 831-854, September.
    20. Pedro Salas-Rojo & Juan Gabriel Rodríguez, 2022. "Inheritances and wealth inequality: a machine learning approach," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 20(1), pages 27-51, March.

    More about this item

    Keywords

    Computable general equilibrium; welfare state; social security reform; retirement.;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gra:wpaper:21/16. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Angel Solano Garcia. (email available below). General contact details of provider: https://edirc.repec.org/data/dtugres.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.