References of "International Tax and Public Finance"
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See detailThe political economy of derived pension rights
Pestieau, Pierre ULg; Leroux, Marie Louise

in International Tax and Public Finance (2012), 19

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See detailUnequal wages for equal utilities
Cremer, Helmuth; Pestieau, Pierre ULg; Racionero, Maria

in International Tax and Public Finance (2011), 18

When educational policy is supplemented by a redistributive income tax, and when individuals differ in their ability to benefit from education, the optimal policy is typically rather regressive. Resources ... [more ▼]

When educational policy is supplemented by a redistributive income tax, and when individuals differ in their ability to benefit from education, the optimal policy is typically rather regressive. Resources are concentrated on the most able individuals in order to get a “cake” as big as possible to share among individuals through income taxation. In this paper, we put forward another reason to push for regressive education. It is not linked to heterogeneity in innate ability but to the property that welfare may be a convex function of an individual’s wage. For simplicity, we assume a linear education technology and a given education budget. To give the equal wage outcome the best chance to emerge, we also assume that individuals have identical learning abilities. Nevertheless, it turns out that in the first-best wage inequality is always preferable to wage equality. Even more surprisingly, this conclusion remains valid in the second-best when the feasible degree of wage differentiation is sufficiently large. This is in spite of the fact that wage equalization would eliminate any need for distortionary income taxation. [less ▲]

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See detailDesigning a linear pension scheme with forced savings and wage heterogeneity
Cremer, Helmuth; De Donder, Philippe; Maldonado, Dario et al

in International Tax and Public Finance (2007)

This paper studies the optimal linear pension scheme when society consists of rational and myopic individuals. Myopic individuals have, ex ante, a strong preference for the present even though, ex post ... [more ▼]

This paper studies the optimal linear pension scheme when society consists of rational and myopic individuals. Myopic individuals have, ex ante, a strong preference for the present even though, ex post, they would regret not to have saved enough. While rational and myopic persons share the same ex post intertemporal preferences, only the rational agents make their savings and labor supply decisions according to these preferences. Individuals are also distinguished by their productivity. The social objective is “paternalistic”: the utilitarian welfare function depends on ex post utilities. We examine how the presence of myopic individuals affects both the size of the pension system and the degree of redistribution it operates, with and without liquidity constraints. The relationship between proportion of myopic individuals and characteristics of the pension system turns out to be much more complex than one would have conjectured. Neither the impact on the level of pensions nor the effect on their redistributive degree is unambiguous. Nevertheless, we show that under some plausible assumptions adding myopic individuals increases the level of pension benefits and leads to a shift from a flat or even targeted scheme to a partially contributory one. However, we also provide an example where the degree of redistribution is not a monotonic function of the proportion of myopic individuals. [less ▲]

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See detailVoting on pensions with endogenous retirement age
Casamatta, G.; Cremer, H.; Pestieau, Pierre ULg

in International Tax and Public Finance (2005), 12(1), 7-28

It is often argued that the observed trend towards early retirement is due mainly to the implicit tax imposed on continued activity of elderly workers. We study the relevance of such a distortion in a ... [more ▼]

It is often argued that the observed trend towards early retirement is due mainly to the implicit tax imposed on continued activity of elderly workers. We study the relevance of such a distortion in a political economy model with endogenous age of retirement. The setting is a two-period overlapping generations model. Individuals differ in their productivity. In the first period they work a fixed amount of time; in the second, they choose when to retire and then receive a flat rate pension benefit. Pensions are financed by a payroll tax on earnings in the first and in the second period of life. Such a tax is non distortionary in the first period; it is distortionary in the second period. We allow for some rebating of the second period tax. Individuals vote on the level of the payroll tax given the rebate which can range from 0 (biased system) to 100% (neutral system). We provide sufficient conditions for the existence of a voting equilibrium and study its properties. Under these conditions, high tax rates are supported by all the old and by low productivity young individuals. We show that the pivotal voter is a young individual. The number of young individuals who have higher wage than the pivotal voter equals half the total population. We also show that the introduction of a bias increases the political support for the pension system. Finally, we study the simultaneous determination of the bias and the tax rate through a voting procedure and show that the equilibrium (if any) implies a bias which is always positive and may or not be larger than one. [less ▲]

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See detailOptimal income taxation and the ability distribution: Implications for migration equilibria
Hamilton, J.; Pestieau, Pierre ULg

in International Tax and Public Finance (2005), 12(1), 29-45

As recently argued by Diamond (1998), one of the key factors explaining the progressivity of an optimal non-linear income tax is the distribution of productivity among workers. Migration is one source of ... [more ▼]

As recently argued by Diamond (1998), one of the key factors explaining the progressivity of an optimal non-linear income tax is the distribution of productivity among workers. Migration is one source of changes in the productivity distribution. How changes in the population's ability distribution affect optimal income tax schedules has received little attention. Changing the distribution generally affects both the objective function and the government budget constraint. We first consider the comparative statics of the fraction of highly-skilled workers with maximin and maximax welfare functions (so that only the second effect is present) and a quasi-linear utility function. We also present some results for a utilitarian social welfare function. We then study the interaction between mobility and redistributive taxation. We consider mobility by either the skilled or unskilled population under majority voting where governments take the population as fixed. If individuals choose to relocate independently, having identical ability distributions is always a stable equilibrium when the unskilled are the mobile group. However, this is not always the case when the skilled are mobile. If groups of individuals can choose where to locate, having identical ability distributions across regions is only an equilibrium when the mobile type has an overall majority. [less ▲]

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See detailThe double dividend of postponing retirement
Cremer, H.; Pestieau, Pierre ULg

in International Tax and Public Finance (2003), 10(4), 419-434

Early retirement seems to plague social security systems in a number of European countries. In this paper we argue that delaying retirement may have two positive effects: it is likely to partially restore ... [more ▼]

Early retirement seems to plague social security systems in a number of European countries. In this paper we argue that delaying retirement may have two positive effects: it is likely to partially restore the financial balance of the system, and it may foster redistribution among retirees. To obtain such a double dividend, the benefit rule of the initial social security scheme must have the following two characteristics. First, it operates redistribution within generations. Second, it is "biased" and induces early retirement. [less ▲]

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