Progressing Towards Efficiency: The Role for Labor Tax Progression in Reforming Social Security

Krzysztof Makarski, Joanna Tyrowicz and Oliwia Komada
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Oliwia Komada: GRAPE

No 15100, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We study interactions between progressive labor taxation and social security reform. Increasing longevity puts fiscal strain that necessitates the social security reform. The current social security is redistributive, thus providing (at least partial) insurance against idiosyncratic income shocks, but at the expense of labor supply distortions. A reform which links pensions to individual incomes reduces distortions associated with social security contributions, but incurs insurance loss. We show that the progressive labor tax can partially substitute for the redistribution in social security, thus reducing the insurance loss.

Keywords: social security reform; labor income tax; redistribution; insurance; welfare effects (search for similar items in EconPapers)
JEL-codes: C68 D72 E62 H55 J26 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2022-02
New Economics Papers: this item is included in nep-age, nep-dge, nep-ias, nep-lma, nep-mac, nep-pbe and nep-pub
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Related works:
Working Paper: Progressing towards efficiency: the role for labor tax progression in reforming social security (2021)
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