Second-best Properties of Implicit Social Security Taxes: Theory and Empirical Evidence

Robert Fenge, Silke Uebelmesser and Martin Werding

No 743, CESifo Working Paper Series from CESifo

Abstract: This paper investigates the inter-temporal structure of implicit taxes that arise in unfunded pension schemes. We demonstrate that these tax rates are declining over the life cycle. Using German micro-data for men and married women we estimate periodic wage elasticities of labour supply in order to check the second-best properties of this timing of tax rates. An efficient taxation would require to decrease the excessive implicit taxes for married women and to implement an inversely "J-shaped" tax profile for male workers. This result contradicts the standard proposal to smooth the profile of implicit tax rates across the individual life cycle

Keywords: public pensions; labour supply; optimal taxation (search for similar items in EconPapers)
Date: 2002
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Citations: View citations in EconPapers (16)

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