Pension Reform and Labor Market Incentives

Fisher, Walter H. and Keuschnigg, Christian (May 2007) Pension Reform and Labor Market Incentives. IHS Economics Series 208

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Abstract: This paper investigates how parametric reform in a pay-as-you-go pension system with a tax benefit link affects retirement incentives and work incentives of prime-age workers. We find that postponed retirement tends to harm incentives of prime-age workers in the presence of a tax benefit link, thereby creating a policy trade-off in stimulating aggregate labor supply. We show how several popular reform scenarios are geared either towards young or old workers, or, indeed, both groups under appropriate conditions. We also provide a sharp characterization of the excess burden of pension insurance and show how it depends on the behavioral supply elasticities on the extensive and intensive margins and the effective tax rates implicit in contribution rates.;

Item Type:	IHS Series
Keywords:	'Pension reform' 'Retirement' 'Hours worked' 'Tax benefit link' 'Actuarial adjustment' 'Excess burden'
Classification Codes (e.g. JEL):	H55, J26
Status:	Published
Date Deposited:	26 Sep 2014 10:38
Last Modified:	27 Mar 2018 22:01
URI:	http://irihs.ihs.ac.at/id/eprint/1769

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