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On the redistributive power of pensions

Laroque, G; Choné, P; (2018) On the redistributive power of pensions. Social Choice and Welfare , 50 (3) pp. 519-546. 10.1007/s00355-017-1094-0. Green open access

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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.

Type: Article
Title: On the redistributive power of pensions
Open access status: An open access version is available from UCL Discovery
DOI: 10.1007/s00355-017-1094-0
Publisher version: https://doi.org/10.1007/s00355-017-1094-0
Language: English
Additional information: © The Author(s) 2017. Open Access: This article is distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license, and indicate if changes were made.
UCL classification: UCL > Provost and Vice Provost Offices
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of SandHS > Dept of Economics
URI: http://discovery.ucl.ac.uk/id/eprint/10027591
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