How should a government finance pension benefits?

Masaya Yasuoka

Australian Economic Papers, 2021, vol. 60, issue 1, 138-152

Abstract: Based on an earlier report by Ono (2010), this paper presents consideration of a consumption tax and examines how tax reform to maintain the neutrality of pension benefits affects the income growth rate and the employment rate. A decrease in the rate of worker contribution (labour income tax rate) with an increase in a consumption tax raises employment, but the effect on income growth is ambiguous. A decrease in the rate of firm contribution with an increase in the consumption tax decreases employment and facilitates income growth. Therefore, if the unemployment rate must be decreased, then pension reform with a decrease in the rate of worker contribution should be selected. The results derived through the study described in this paper are consistent with the empirical facts. Moreover, for these analyses, we assume the other production function and confirm the robustness of the obtained results.

Date: 2021
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https://doi.org/10.1111/1467-8454.12197

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Persistent link: https://EconPapers.repec.org/RePEc:bla:ausecp:v:60:y:2021:i:1:p:138-152

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