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Social Security Reform and Intergenerational Trade: Is there Scope for a Pareto-Improvement?

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Author Info
Marko Köthenbürger (Center for Economic Studies, University of Munich)
Panu Poutvaara (Centre for Economic & Business Research)

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Abstract

In earlier literature, the suggested Pareto improvements in pay-as-you- go (PAYG) systems have relied on the presence of externalities or the possibility of intragenerational redistribution. We show that neither assumption is necessary in an economy with intergenerational trade in a fixed factor of production, here labeled as land. Reducing the social security tax rate encourages investment in complementary human capital. Future efficiency gains accruing to land are capitalized in its value which compensates the land-owning pensioners for reduced benefits. We also explain why the PAYG system may have lost its appeal even for pensioners after its introduction.

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Paper provided by EconWPA in its series Public Economics with number 0404008.

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Length: 34 pages
Date of creation: 19 Apr 2004
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Handle: RePEc:wpa:wuwppe:0404008

Note: Type of Document - pdf; pages: 34
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Related research
Keywords: Social Security Reform; Fixed Factor; Pay-As-You-Go System; Capital Gains Taxation;

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Find related papers by JEL classification:
H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
I38 - Health, Education, and Welfare - - Welfare and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    Other versions:
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Yvonne Adema & Lex Meijdam & Harrie A. A Verbon, 2005. "The International Spillover Effects of Pension Reform," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  2. Koethenbuerger, Marko / Poutvaara, Panu, 2007. "Rent Taxation and its Intertemporal Welfare Effects in a Small Open Economy," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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