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Is there a social security tax wedge?

  • Alessandro Cigno


A Beveridgean pension scheme invariably introduces a wedge between the wage rate and the marginal take-home pay. A Bis- marckian one can do so only if it is not actuarially fair, or in the presence of credit rationing. Interestingly, if the two possible sources of distortion are present at the same time, they will tend to o¤set each other. The distortion may even change sign (the wedge may become a premium). In any case, the same pension contribution will discourage labour less if the scheme is Bismar- ckian, than if it is Beveridgean.

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Paper provided by CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY in its series CHILD Working Papers with number wp04_06.

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Length: 10 pages
Date of creation: Jan 2006
Date of revision:
Handle: RePEc:wpc:wplist:wp04_06
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  1. Robert Fenge & Martin Werding, 2004. "Ageing and the tax implied in public pension schemes: simulations for selected OECD countries," Fiscal Studies, Institute for Fiscal Studies, vol. 25(2), pages 159-200, June.
  2. Del Boca, Daniela & Lusardi, Annamaria, 2003. "Credit market constraints and labor market decisions," Labour Economics, Elsevier, vol. 10(6), pages 681-703, December.
  3. Francesco Daveri & Guido Tabellini, 2000. "Unemployment, growth and taxation in industrial countries," Economic Policy, CEPR;CES;MSH, vol. 15(30), pages 47-104, 04.
  4. Murphy, Kevin M & Welch, Finis, 1998. "Perspectives on the Social Security Crisis and Proposed Solutions," American Economic Review, American Economic Association, vol. 88(2), pages 142-50, May.
  5. Cigno, Alessandro & Rosati, Furio C., 1996. "Jointly determined saving and fertility behaviour: Theory, and estimates for Germany, Italy, UK and USA," European Economic Review, Elsevier, vol. 40(8), pages 1561-1589, November.
  6. Perotti, Roberto & Alesina, Alberto, 1997. "The Welfare State and Competitiveness," Scholarly Articles 4553027, Harvard University Department of Economics.
  7. Alesina, Alberto & Perotti, Roberto, 1997. "The Welfare State and Competitiveness," American Economic Review, American Economic Association, vol. 87(5), pages 921-39, December.
  8. Alessandro Cigno & Luca Casolaro & Furio C. Rosati, 2002. "The Impact of Social Security on Saving and Fertility in Germany," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 59(2), pages 189-, May.
  9. Eytan Sheshinski, 1977. "A Model of Social Security and Retirement Decisions," NBER Working Papers 0187, National Bureau of Economic Research, Inc.
  10. Jappelli, Tullio, 1990. "Who Is Credit Constrained in the U.S. Economy?," The Quarterly Journal of Economics, MIT Press, vol. 105(1), pages 219-34, February.
  11. Borsch-Supan, Axel & Reil-Held, Anette, 2001. " How Much Is Transfer and How Much Is Insurance in a Pay-As-You-Go System? The German Case," Scandinavian Journal of Economics, Wiley Blackwell, vol. 103(3), pages 505-24, September.
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