Improving the Equity-Efficiency Trade-Off: Mandatory Savings Accounts for Social Insurance

Lans Bovenberg and Peter Birch Sørensen
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Peter Birch Sørensen: Economic Policy Research Unit, Institute of Economics, University of Copenhagen

No 03-07, EPRU Working Paper Series from Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics

Abstract: In the modern welfare state a substantial part of an individual’s tax bill is transferred back to the same individual taxpayer in the form of social transfers. This provides a rationale for financing part of social insurance through mandatory savings accounts. We analyze the behavioral and welfare effects of compulsory savings accounts in an intertemporal model with uncertainty, endogenous involuntary unemployment and retirement decisions, credit constraints, and heterogeneous agents. We show that the introduction of (early) retirement and unemployment accounts generates a Pareto improvement by enabling the government to provide lifetime income insurance and liquidity insurance ina more effcient manner.

Pages: 42 pages
Date: 2003-08
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Improving the Equity-Efficiency Trade-Off: Mandatory Savings Accounts for Social Insurance (2004)
Working Paper: Improving the Equity-Efficiency Trade-off: Mandatory Savings Accounts for Social Insurance (2003)
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