IDEAS home Printed from https://ideas.repec.org/p/mrr/papers/wp339.html
   My bibliography  Save this paper

How Well Does the Australian Aged Pension Provide Social Insurance?

Author

Listed:
  • Emily Dabbs

    (Research School of Economics, Australian National University)

  • Cagri Kumru

    (Research School of Economics, Australian National University)

Abstract

Social security plays an essential role in an economy, but if designed incorrectly can distort the labor supply and savings behavior of individuals in the economy. We explore how well the Australian means-tested pension system provides social insurance by calculating possible welfare gains from changing the settings in the current means-tested pension system. This work has been explored by other researchers both in Australia and in other pension-providing economies. However, most research ignores the fact that welfare gains can be found by reducing the cost of the program. To exclude these welfare costs, this paper fixes the cost of the system. We find that the means-tested pension system is welfare reducing, but does provide a better outcome than an equivalent-costing PAYG system. We also find that if the benefit amount is held constant, and hence the cost of the pension program is allowed to vary, a taper rate of 1.0 is optimal. However, once we fix this cost, a universal benefit scheme provides the best welfare outcome.

Suggested Citation

  • Emily Dabbs & Cagri Kumru, 2015. "How Well Does the Australian Aged Pension Provide Social Insurance?," Working Papers wp339, University of Michigan, Michigan Retirement Research Center.
  • Handle: RePEc:mrr:papers:wp339
    as

    Download full text from publisher

    File URL: http://www.mrrc.isr.umich.edu/publications/Papers/pdf/wp339.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Unknown, 1974. "Appendix II," International Journal of Agrarian Affairs, International Association of Agricultural Economists, vol. 0, pages 1-3.
    2. Kudrna, George & Woodland, Alan, 2011. "An inter-temporal general equilibrium analysis of the Australian age pension means test," Journal of Macroeconomics, Elsevier, vol. 33(1), pages 61-79, March.
    3. Cho, Sang-Wook (Stanley) & Sane, Renuka, 2013. "Means-Tested Age Pensions And Homeownership: Is There A Link?," Macroeconomic Dynamics, Cambridge University Press, vol. 17(06), pages 1281-1310, September.
    Full references (including those not matched with items on IDEAS)

    More about this item

    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:mrr:papers:wp339. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (MRRC Administrator) or (Cindy George). General contact details of provider: http://edirc.repec.org/data/isumius.html .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.