Trade-offs in means tested pension design

Chung Tran and Alan Woodland

Journal of Economic Dynamics and Control, 2014, vol. 47, issue C, 72-93

Abstract: The means-testing of age pension programs allows governments to control the receipt of pension benefits (extensive margin) and the benefit level (intensive margin). We investigate how the presence of the extensive margin influences the trade-off between protecting the poorer elderly and the economic costs of distorting incentives to work and save of young individuals. The means-test effect via the extensive margin improves the insurance aspect but introduces opposing impacts on incentives that potentially have ambiguous welfare outcomes. We characterize combinations of the maximum pension benefit and taper rate that balance the negative incentive effects and positive insurance effects.

Keywords: Means-tested pension; Social security; Optimal policy; Overlapping generations; Dynamic general equilibrium (search for similar items in EconPapers)
JEL-codes: D9 E2 E6 H3 H5 J1 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Related works:
Working Paper: Trade-Offs in Means Tested Pension Design (2011)
Working Paper: Trade-Offs in Means Tested Pension Design (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:47:y:2014:i:c:p:72-93

DOI: 10.1016/j.jedc.2014.07.005

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