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A Quantitative Investigation of the Laffer Curve on the Continued Work Tax: The French Case

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  • Hairault, Jean-Olivier

    () (University of Paris 1 Panthéon-Sorbonne)

  • Langot, François

    () (University of Le Mans)

  • Sopraseuth, Thepthida

    () (University of Cergy-Pontoise)

Abstract

It is often argued that the tax on continued work should be removed by implementing actuarially fair schemes. However, these schemes cannot help fund the expected Social Security deficit. This paper proposes to give individuals only a fraction of the marginal actuarially fair incentives in case of postponed retirement. Social Security then faces a trade-off between giving enough incentives to make individuals actually delay retirement and giving little increase in pensions in order to help finance its expected deficit. This trade-off is captured by a Laffer curve that we quantify on French data. Furthermore, we analyze the interactions between wealth and retirement behavior.

Suggested Citation

  • Hairault, Jean-Olivier & Langot, François & Sopraseuth, Thepthida, 2005. "A Quantitative Investigation of the Laffer Curve on the Continued Work Tax: The French Case," IZA Discussion Papers 1499, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp1499
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    References listed on IDEAS

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    1. David A. Wise, 1989. "The Economics of Aging," NBER Books, National Bureau of Economic Research, Inc, number wise89-1, January.
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    3. John Rust & Christopher Phelan, 1997. "How Social Security and Medicare Affect Retirement Behavior in a World of Incomplete Markets," Econometrica, Econometric Society, vol. 65(4), pages 781-832, July.
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    Cited by:

    1. Raquel Fonseca & Thepthida Sopraseuth, 2005. "Welfare Effects of Social Security Reforms Across Europe : the Case of France and Italy," CSEF Working Papers 138, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.

    More about this item

    Keywords

    actuarially fair benefits; retirement behavior and wealth;

    JEL classification:

    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • 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

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