THE WELFARE EFFECTS OF PAY‐AS‐YOU‐GO RETIREMENT PROGRAMS: THE ROLE OF TAX AND BENEFIT TIMING

Alan Viard ()

Contemporary Economic Policy, 2007, vol. 25, issue 2, 282-292

Abstract: It is well known that pay‐as‐you‐go retirement programs reduce steady‐state welfare and the capital stock in dynamically efficient overlapping generation (OLG) economies. The common two‐period OLG model obscures, however, the relationship between the magnitude of these effects and the ages at which taxes are paid and benefits received. Program changes that shift taxes to older workers or benefits to younger retirees have effects similar to reductions in program size, yielding steady‐state welfare gains and increases in capital accumulation while imposing transition costs on current generations. This analysis has policy implications for both tax and benefit timing. (JEL H55, E62)

Date: 2007
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https://doi.org/10.1111/j.1465-7287.2007.00038.x

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Working Paper: The welfare effects of pay-as-you-go retirement programs: the role of tax and benefit timing (2006)
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