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Optimal pensions with endogenous labour supply

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  • Hatcher, Michael

Abstract

We show that a two-part pension system provides optimal capital accumulation without distorting labour supply, thereby achieving the first-best. An economy with too little retirement saving should combine a negative income tax with a consumption tax to replicate the first-best allocation without using any lump-sum taxes. Our results are shown in a classic Diamond overlapping generations model that is augmented with endogenous labour supply on the intensive margin.

Suggested Citation

  • Hatcher, Michael, 2024. "Optimal pensions with endogenous labour supply," Economics Letters, Elsevier, vol. 244(C).
    • Handle: RePEc:eee:ecolet:v:244:y:2024:i:c:s0165176524005172
    DOI: 10.1016/j.econlet.2024.112033
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