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Should Old-Age Benefits Be Earnings-Tested?

  • Määttänen, Niku

    ()

    (ETLA - The Research Institute of the Finnish Economy)

  • Poutvaara, Panu

    ()

    (University of Munich)

We study the welfare effects of earnings testing flat-rate old-age benefits in a quantitative overlapping generations model with idiosyncratic labor income risk. In our model economy, even a moderate earnings testing reduces individuals’ expected lifetime utility, whenever other taxes are taken into account. Moreover, it also lowers the realized lifetime utilities of those at the bottom of the lifetime utility distribution.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2616.

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Length: 29 pages
Date of creation: Feb 2007
Date of revision:
Handle: RePEc:iza:izadps:dp2616
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  17. Alexander Michaelides & Francisco Gomes, 2004. "Aggregate Implications of Defined Benefit and Defined Contribution Systems," 2004 Meeting Papers 335, Society for Economic Dynamics.
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