Article (Scientific journals)
Social security, retirement age and optimal income taxation
Cremer, Helmuth; Lozachmeur, Jean-Marie; Pestieau, Pierre
2004In Journal of Public Economics, 88 (11), p. 2259-2281
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Keywords :
social security; retirement age; implicit taxation; disability insurance
Abstract :
[en] It is often argued that implicit taxation on continued activity of elderly workers is responsible for the widely observed trend towards early retirement. In a world of laissez-faire or of first-best efficiency, there would be no such implicit taxation. The point of this paper is that, when first-best redistributive instruments are not available, because some variables are not observable, the optimal policy does imply a distortion of the retirement decision. Consequently, the inducement of early retirement may be part of the optimal tax-transfer policy. We consider a model in which individuals differ in their productivity and their capacity to work long and choose both their weekly labor supply and their age of retirement. We characterize the optimal non-linear tax-transfer that maximizes a utilitarian welfare function when weekly earnings and the length of active life are observable while individuals' productivity and health status are not observable. (C) 2003 Elsevier B.V. All rights reserved.
Disciplines :
Microeconomics
Author, co-author :
Cremer, Helmuth
Lozachmeur, Jean-Marie
Pestieau, Pierre  ;  Université de Liège - ULiège > HEC - École de gestion de l'ULiège > Economie publique
Language :
English
Title :
Social security, retirement age and optimal income taxation
Publication date :
September 2004
Journal title :
Journal of Public Economics
ISSN :
0047-2727
Publisher :
Elsevier Science Sa, Lausanne, Switzerland
Volume :
88
Issue :
11
Pages :
2259-2281
Peer reviewed :
Peer Reviewed verified by ORBi
Available on ORBi :
since 07 April 2013

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