EconPapers    
Economics at your fingertips  
 

Macroeconomic consequences of raising social security contributions in Germany

Pavel Brendler ()
Additional contact information
Pavel Brendler: University of Bonn

No 214-2022, IMK Working Paper from IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute

Abstract: Population aging imposes a challenge for the public pension systems in many developed countries. The solvency of the pension system requires a broad set of policy measures. The paper addresses the following question: What are the macroeconomic consequences of increasing the social security contribution rate in Germany? The question is answered theoretically by setting up a two-period partial equilibrium overlapping generations (OLG) model and analyzing the impact of a marginal increase in the contribution rate on the worker's optimal labor supply. The key finding is that the labor supply response crucially depends on the model assumptions regarding: 1) the relative magnitudes of the population growth rate and the real rate of return on private saving, 2) the individual's utility function; and 3) the labor income tax and the pension benefit function. In case of a linear labor income tax and earnings-dependent pensions, which approximate the current German pension system, the theory predicts a rise in employment in response to a payroll tax increase for a conventional specification of the utility function and a plausible parameterization of the model parameters.

Keywords: Population aging; Public pension program; Pension reform; Labor taxation (search for similar items in EconPapers)
JEL-codes: D3 E6 H2 H3 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2022
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.boeckler.de/pdf/p_imk_wp_214_2022.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.boeckler.de/pdf/p_imk_wp_214_2022.pdf [301 Moved Permanently]--> https://www.boeckler.de/pdf/p_imk_wp_214_2022.pdf)

Related works:
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: https://EconPapers.repec.org/RePEc:imk:wpaper:214-2022

Access Statistics for this paper

More papers in IMK Working Paper from IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute Contact information at EDIRC.
Bibliographic data for series maintained by Sabine Nemitz ().

 
Page updated 2023-01-28
Handle: RePEc:imk:wpaper:214-2022