Introducing an Austrian Backpack in Spain

Julian Diaz Saavedra (), Ramon Marimon and Joao Brogueira de Sousa
Additional contact information
Julian Diaz Saavedra: Department of Economic Theory and Economic History, University of Granada.
Ramon Marimon: European University Institute, UPF - Barcelona GSE, CEPR and NBER.
Joao Brogueira de Sousa: Nova School of Business and Economics.
Authors registered in the RePEc Author Service: Julián Díaz-Saavedra

No 21/16, ThE Papers from Department of Economic Theory and Economic History of the University of Granada.

Abstract: In an overlapping generations economy with incomplete insurance markets, the introduction of an employment fund – akin to the one introduced in Austria in 2003, also known as ‘Austrian backpack’– can enhance production efficiency and social welfare. It complements the two classical systems of public insurance: pay-as-you-go (PAYG) pensions and unemployment insurance (UI).We show this in a calibrated dynamic general equilibrium model with heterogeneous agents of the Spanish economy in 2018. A ‘backpack’ (BP) employment fund is an individual (across jobs) transferable fund, which earns the economy interest rate as a return and is financed with a payroll tax (a BP tax). The worker can use the fund when becomes unemployed or retires. In Spain, as an open economy, to complement the existing PAYG pension and UI systems with a welfare maximising 6% BP tax would raise welfare by 0.96% of average consumption at the new steady state, and would be preferred to the status quo by most economic and demographic groups. We also analyze, as a reference, Spain as a closed economy. There are important general equilibrium effects and, as a result, the social value of introducing the backpack is substantially greater; 16.14%, with a BP tax of 18%. Our model also provides a framework where to study reforms of existing social protection systems supported by the introduction of the BP.

Keywords: Computable general equilibrium; welfare state; social security reform; retirement. (search for similar items in EconPapers)
JEL-codes: C68 H55 J26 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2021-12-04
New Economics Papers: this item is included in nep-age, nep-dge, nep-ias, nep-lma and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.ugr.es/~teoriahe/RePEc/gra/wpaper/thepapers21_16.pdf (application/pdf)

Related works:
Journal Article: Introducing an Austrian backpack in Spain (2022)
Working Paper: Introducing an Austrian Backpack in Spain (2022)
Working Paper: Introducing an Austrian Backpack in Spain (2022)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gra:wpaper:21/16

Access Statistics for this paper

More papers in ThE Papers from Department of Economic Theory and Economic History of the University of Granada. Campus Universitario de Cartuja. Contact information at EDIRC.
Bibliographic data for series maintained by Angel Solano Garcia. ().