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Financing Pay-as-you-go Public Pension Systems: Some Notes in the Light of the Classical-type Theory of Income Distribution

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  • Sergio Nisticò

Abstract

The paper uses a Sraffa-type two-sector model to study how the presence of retired workers interacts with the distribution of the surplus between workers and capitalists (firms). In particular, the paper investigates how the ongoing diminution of the ratio between active and retired workers affects the wage-profits-pensions frontier, which is defined after allowing that a social security tax, which reduces the claims of active workers and capitalists on the surplus of the economy, finances the pensions distributed each year to retired workers. Finally, it is argued that the different impact of defined-benefit and defined-contribution pay-as-you-go pension schemes depends on the actual incidence of payroll taxes.

Suggested Citation

  • Sergio Nisticò, 2013. "Financing Pay-as-you-go Public Pension Systems: Some Notes in the Light of the Classical-type Theory of Income Distribution," Review of Political Economy, Taylor & Francis Journals, vol. 25(3), pages 426-443, July.
    • Handle: RePEc:taf:revpoe:v:25:y:2013:i:3:p:426-443
    DOI: 10.1080/09538259.2013.807670
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    References listed on IDEAS

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    1. Ricardo, David, 1821. "On the Principles of Political Economy and Taxation," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, edition 3, number ricardo1821.
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