Optimal pensions with endogenous labour supply

Michael Hatcher

Economics Letters, 2024, vol. 244, issue C

Abstract: We show that a two-part pension system provides optimal capital accumulation without distorting labour supply, thereby achieving the first-best. An economy with too little retirement saving should combine a negative income tax with a consumption tax to replicate the first-best allocation without using any lump-sum taxes. Our results are shown in a classic Diamond overlapping generations model that is augmented with endogenous labour supply on the intensive margin.

Keywords: Pensions; Labour supply; First-best; Optimal taxes; Saving; Pay-as-you-go (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:244:y:2024:i:c:s0165176524005172

DOI: 10.1016/j.econlet.2024.112033

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