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Journal Articles Social Choice and Welfare Year : 2018

On the Redistributive Power of Pensions

Abstract

We study the tradeoff between efficiency and redistribution in a model with overlapping generations, extensive labor supply, and perfect financial markets. The government instruments are a pension scheme and a age-independent nonlinear income tax schedule. At the second-best optimum, the pension system constrains the agents’ labor supply behavior, forcing them to work to achieve a required lifetime performance. Income taxes affect labor supply directly, but also indirectly through pension incentives. The indirect effect of taxes counteracts the usual forces in the efficiency-redistribution tradeoff: through the interplay with the pension system, decreasing taxes induces redistribution and reduces productive efficiency.

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hal-03915272 , version 1 (29-12-2022)

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Philippe Choné, Guy Laroque. On the Redistributive Power of Pensions. Social Choice and Welfare, 2018, 50 (3), pp.519-546. ⟨10.1007/s00355-017-1094-0⟩. ⟨hal-03915272⟩
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