At Whose Service? Subsidizing Services and the Skill Premium

In this paper we investigate the effects of subsidizing low-skilled, labourintensive services hired by high-skilled individuals in the presence of labour income taxation. Whether such a subsidy can be Paretoimproving depends crucially on the degree of substitutability of both types of labour in the non-service sector. In case of some substitutability, a service subsidy can benefit all and decrease inequality, but in case of complementarity, low-skilled individuals benefit and high-skilled individuals are worse off.household production;services;skill premium;subsidy;wage tax

At whose service? Subsidizing services and the skill premium

In this paper we investigate the effects of subsidizing low-skilled, labour-intensive services hired by high-skilled individuals in the presence of labour income taxation. Whether such a subsidy can be Pareto-improving depends crucially on the degree of substitutability of both types of labour in the non-service sector. In case of some substitutability, a service subsidy can benefit all and decrease inequality, but in case of complementarity, low-skilled individuals benefit and high-skilled individuals are worse off.household production, services, skill premium, subsidy, wage tax

Social Security Reform and Population Ageing in a Two-Sector Growth Model

This paper analyses the effects of reducing unfunded social security and population ageing on economic growth and welfare, both for a small open economy and for a closed economy.The economy consists of a service sector and a commodity sector.Productivity growth only occurs in the latter sector and is assumed to depend positively on its size.It is shown that if old agents mainly demand labour intensive services, a decrease of the pay-as-you-go (PAYG) pension scheme reduces long-run growth and thus welfare in a small open economy, whereas current generations are better off.However, reducing social security raises productivity growth in a closed economy, both in the short and long run. Furthermore, ageing will lead to a lower long-run rate of economic growth in a small open economy, whereas in the short run, the effects depend on the type of ageing and the size of the PAYG-scheme.In a closed economy, the effects of ageing depend on the substitutability of labour and capital.economic growth;welfare;social security;pensions;privatization;ageing;population dynamics;overlapping generations

Family Size, Looming Demographic Changes and the Efficiency of Social Security Reform

This paper analyses the eeffects of ageing and child support in a model with endogenous fertility and Pay-As-You-Go (PAYG) pensions. First, we show that the endogeneity of fertility makes society vulnerable to both pessimistic beliefs and changes in life expectancy. In particular, we show that the private fertility choice may not coincide with the social optimum, due to the existence of two external effects of a child on society as a whole. The market outcome without government intervention is efficient, however, as both externalities exactly cancel out in that case. If the government wants to redistribute towards the old, it cannot replicate the command optimum by merely applying lump-sum transfers, but rather needs a child allowance scheme to effectively alter the number of offspring chosen by households. Finally, we analyse whether a Pareto-improving social security reform is possible. It is shown that a mere reduction of the PAYG-scheme cannot be Pareto-improving, but a combined policy of decreasing the PAYG-tax and introducing child allowances can be.child allowances;ageing;pensions;endogenous fertility;rumours;overlapping generations;social security reform

General-Equilibrium Effects of Privatisation: The Missing Piece in Social Security Reform

This paper analyses the effects of reducing unfunded social security in a closed economy that consists of a service sector and a commodity sector.It is shown that if old agents mainly demand labour intensive services, a modest decrease of the pay-as-you-go pension scheme still raises long-run utility as long as the economy is dynamically efficient.However, entirely privatising the social security system will sooner lead to dynamic inefficiency than in the conventional one-sector model, leading to a different conclusion about the desirability of unfunded pensions.social security;pensions;privatization;overlapping generations

The Effects of Asymmetric Demographic Shocks with Perfect Capital Mobility

population dynamics;ageing;pensions;capital movements;overlapping generations

At Whose Service? Subsidizing Services and the Skill Premium

In this paper we investigate the effects of subsidizing low-skilled, labourintensive services hired by high-skilled individuals in the presence of labour income taxation. Whether such a subsidy can be Paretoimproving depends crucially on the degree of substitutability of both types of labour in the non-service sector. In case of some substitutability, a service subsidy can benefit all and decrease inequality, but in case of complementarity, low-skilled individuals benefit and high-skilled individuals are worse off.

Benefits of EMU Participation:Estimates using the Synthetic Control Method

This paper investigates quantitatively the benefits from participation in the Economic and Monetary Union for individual Euro area countries. Using the synthetic control method, we estimate how real GDP per capita would have developed for the EMU member states, if those countries had not joined the EMU. The estimates show that most countries have profited from having the euro, though the crisis leads to negative effects of EMU membership. The PIGS countries, in particular, would have been better off if they had not been an EMU member during the crisis, however, Greece, Portugal and Spain experienced the largest benefits of EMU participation in the pre-crisis period

Population ageing and the international capital market

Abstract This paper analyses the effects of ageing on the international capital market. The first part applies a simple model and distinguishes between the cases of a small open economy and a closed economy to explore the separate effects of ageing, the design of pension schemes and government policy on savings, labour supply and the interest rate. The second part of the paper analyses cross-border capital flows and spillover effects caused by international differences in ageing patterns, pension schemes and policy reactions. The final part is devoted to the quantitative effects found by various recent simulation studies