 Capital income taxation and reforming social security in an OLG economyKrzysztof Makarski, Joanna Tyrowicz and Oliwia Komada Journal of Economic Dynamics and Control, 2024, vol. 165, issue C Abstract: Reforming social security can improve efficiency and reduce future fiscal strain, emerging with the rising old-age longevity. However, it generates transitory fiscal cost and reduces insurance against income risk, which is embedded in current US social security. We show that if that transitory fiscal cost is financed through increased capital income taxation, the efficiency gains can be amplified sufficiently to outweigh the costs of the reform. Our result stems from the Ramsey rule: rising old-age longevity makes capital less responsive to tax hikes. We reconcile our results with the existing literature. Our results are of policy relevance for many advanced economies which currently feature redistributive and increasingly unbalanced social security due to rising old-age longevity. Keywords: Social security reform; Capital income taxation; Longevity; Fiscal policy; Welfare effects (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:165:y:2024:i:c:s0165188924000708 DOI: 10.1016/j.jedc.2024.104878 Access Statistics for this article Journal of Economic Dynamics and Control is currently edited by J. Bullard, C. Chiarella, H. Dawid, C. H. Hommes, P. Klein and C. Otrok More articles in Journal of Economic Dynamics and Control from Elsevier |
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