Institutional Incentives for Early Retirement in the EU Member States

Flexible Altersgrenze, Rentenpolitik, Rentenreform, Ökonomischer Anreiz, Gesetzliche Rentenversicherung, EU-Staaten, Flexible retirement, Pensions policy, Pension reform, Economic incentive, Public pension system, EU countries

Why Cities Should not be Subsidized

The paper deals with the question of whether fiscal transfers re-ceived by cities can be justified by a higher cost of producing publicly provided goods. In the model, increasing the population density implies both a higher output per capita due to agglomeration economies and a higher cost of the publicly provided good due to congestion. It is shown that introducing fiscal transfers to be paid by the region with the lower population density will generally reduce welfare. This result is obtained since the city is already beyond the level of optimum agglomeration.interjurisdictional transfers, congestion, publicly provided goods

Subsidies for Wages and Infrastructure: How to Restrain Undesired Immigration

This paper investigates regional or international transfers as a means to prevent immigration into unemployment. We analyze a two-country model with free migration in which the rich country is characterized by minimum wage unemployment. Matching grants for investment in infrastructure are superior to wage subsidies because the former instrument leads to a stronger productivity growth in the poor country, reducing both migration flows and unemployment in the rich country. This result is shown to hold for a sufficiently low level of the regional policy budget. It explains the exclusive use of investment subsidies in the EU.regional policy, public infrastructure, wage subsidies, unemployment, migration

Ageing and the Tax Implied in Public Pension Schemes: Simulations for Selected OECD Countries

A key figure which can be applied to measuring inter-generational imbalances involved in existing public pension schemes is given by the “implicit tax” that is levied on each generation’s life-time income through participation in these systems. The implicit tax arises from the fact that, quite generally, pension benefits received fall short of actuarial returns to contributions (i.e., “explicit” social security taxes) paid while actively working. If, in spite of large-scale demographic ageing, public pension schemes are continued to be run based on current rules, implicit tax rates will sharply increase for generations who are currently young when compared to those who are already approaching retirement. In the paper, this will be illustrated for the cases of France, Germany, Italy, Japan, Sweden, the UK, and the US. The results are based on simulations covering representative individuals in all age cohorts born from 1940 to 2000. At the same time, there are striking differences across countries regarding both the level of implicit taxes and their time paths over successive age cohorts, which can be attributed to different ageing processes as well as to different institutional features of national pension systems. In addition, we are studying the impact of pension reforms that were recently enacted or are currently under way, thus demonstrating how effective the measures taken are in terms of smoothing the inter-generational profile of implicit tax rates.demographic ageing, public pensions, pension reform, inter-generational redistribution, international comparisons

Competition in the quality of higher education: the impact of students' mobility

This paper analyzes in a two-country model the impact of students' mobility on the country-specific level of higher educational quality. Individuals decide whether and where to study based on their individual ability and the implemented quality of education. We show that the mobility of students affects educational quality in countries and welfare in a very different way depending on the degree of return migration. With a low return probability, countries choose suboptimally differentiated levels of educational quality, or even no differentiation at all.higher education ; migration ; tuition fees ; education quality ; vertical differentiation

Ageing and Fiscal Imbalances Across Generations: Concepts of Measurement

In the literature, several approaches have been taken to measure the impact of demographic ageing on public pension schemes, with particular attention being paid to potential fiscal imbalances across the generations involved in demographic transition. In this paper, we review three of these measures - viz., “net pension liabilities” and “general government fiscal balances” as suggested by the OECD, as well as “generational accounting” in the Auerbach- Kotlikoff tradition. We show how these approaches are related to each other by the general idea that unfunded pensions create an implicit public debt, and we discuss the problems involved in applying and interpreting them in a real-world context. In addition, we suggest the “implicit tax” entailed in public pensions as a further concept for measuring the inter-generational distribution of burdens arising in ageing populations. The notion of an implicit tax is straightforward from simple pension algebra; it is easy to interpret in a theoretical perspective; and it can be introduced to various kinds of applied work using micro-level data.demographic ageing, public pensions, fiscal policy, inter-generational redistribution, measurement

Taxing Pensions: Cross-country Differences and International Co-ordination

Alterssicherung, Einkommensteuer, OECD-Staaten, Old-age security, Income tax, OECD countries

How Much Fiscal Equalisation?

We treat fiscal equalisation as an insurance device against regional tax revenue variance. This insurance comes at the price of a moral hazard: regional government will spend too little effort on the development of the local tax base. In a simple bargaining model with two identical regions we show that less than total fiscal equalisation combined with lump sum transfers will be optimal. Taking a step back to the constitutional bargaining behind some veil of ignorance which determines the fallback position for later negotiations, we show that writing total fiscal equalisation into the constitution will be optimal.Fiscal equalisation, constitutional bargaining, moral hazard

Mixing Bismarck and Child Pension Systems:An Optimum Taxation Approach

The labor-leisure distortion of a pay-as-you-go pension system can be reduced through a stronger tax-benefit link or Bismarck pension system. Distortions of the fertility decision can be reduced through the introduction of a stronger child-benefit or child pension system.Within our optimal taxation framework, we find a Corlett-Hague result regarding the optimal mix of the two: if and only if children are more complementary to leisure should the taxbenefit link be given a positive weight at the expense of the child-benefit link. The model also allows us to examine the infertility insurance argument that may justify redistribution from families with children to those without implied by most pension systems. We find that the opposite redistribution, from the childless to those with children, would be efficient if individuals have low risk aversion. Redistribution in favor of the infertile would only be justified when risk aversion is high.pay-as-you-go pension, fertility, externality, Bismarck pension, optimal taxation

To what Extent are Public Pensions Pareto-improving? On the Interaction of Means Tested Basic Income and Public Pensions

If there is a means tested basic income for old age, households will tend to reduce precautionary savings to an inefficiently low level. This might serve as a justification for a public pension system. In a representative agent framework, indeed, the introduction of a compulsory pension s ystem is shown to be Pareto improving. This analysis is extended to two income types where compulsory savings are found to be Pareto improving only up to a point. Increases in contribution rates beyond that point simply result in increasingly regressive (implicit) taxation, potentially eliminating all redistribution via the means tested basic income. Using these results in a pay-as-you-go framework, we show that an unfunded pensions system (with intragenerational fairness) plays a role similar to compulsor y savings in preventing the savings moral hazard and could have the same adverse effects on redistribution if it is too large. If the population is aging, however, an unfunded system with a constant contribution rate is found to become less effective at pr eventing the savings moral hazard. In this case, the introduction of a funded system of the right size is needed to restore Pareto efficiency.Public pensions, compulsory savings, means tested basic income