Economics at your fingertips  

Introducing an Austrian backpack in Spain

Joao Brogueira de Sousa (), Julián Díaz-Saavedra () and Ramon Marimon
Additional contact information
Ramon Marimon: Universitat Pompeu Fabra, Barcelona School of Economics

SERIEs: Journal of the Spanish Economic Association, 2022, vol. 13, issue 3, No 1, 513-556

Abstract: 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 a market interest rate as a return and is financed with a payroll tax (a BP tax). The worker can use the fund while unemployed or retired. Upon retirement, backpack savings can be converted into an (actuarially fair) retirement pension. To complement the existing PAYG pension and UI systems with a welfare maximizing 6% BP tax would raise welfare by 0.96% of average consumption at the new steady state, if we model Spain as an open economy. 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%. In both economies, the annuity retirement option is an important component of the welfare gains.

Keywords: Computable general equilibrium; Welfare state; Social security reform; Retirement; C68; H55; J26 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link) Abstract (text/html)

Related works:
Working Paper: Introducing an Austrian Backpack in Spain (2022) Downloads
Working Paper: Introducing an Austrian Backpack in Spain (2022) Downloads
Working Paper: Introducing an Austrian Backpack in Spain (2021) Downloads
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:

Ordering information: This journal article can be ordered from

DOI: 10.1007/s13209-022-00263-x

Access Statistics for this article

SERIEs: Journal of the Spanish Economic Association is currently edited by Nezih Guner

More articles in SERIEs: Journal of the Spanish Economic Association from Springer, Spanish Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().

Page updated 2023-03-05
Handle: RePEc:spr:series:v:13:y:2022:i:3:d:10.1007_s13209-022-00263-x