UNDERREPORTED EARNINGS AND REDISTRIBUTION IN THE OVERLAPPING-GENERATIONS MODEL (Keresetbevallas es ujraelosztas az egyuttelo nemzedekek modelljeben)

• Authors: Simonovits Andras
• Languages of publication: HU

Abstracts

EN

This paper analyses the interconnections between underreported earnings and redistribution. Two generations overlap: the young and the old. The young earn, contribute to the pension system, pay taxes, and if they can, save. The old receive pensions and dissave. Public expenditures are financed from wage taxes. We derive the reported earnings and savings from individual utility maximization, assuming over-discounting of the future, partial satisfaction from reporting earnings, and possible free riding in the use of public services. The government maximizes a social welfare function formed from paternalistic objective utility functions, yielding the parameter values of the socially optimal tax and pension system. For a utilitarian social welfare function and logarithmic utility functions, the optimal proportional (contributional) pension system provides higher welfare than any system containing a flat (basic) component in a dark grey economy, and lower welfare in a light grey economy. But the superiority of the proportional system can probably be re-established if an appropriate means-tested pension is added.

Keywords

EN

INTERTEMPORAL CONSUMER CHOICE; LIFE CYCLE MODELS AND SAVING; SOCIAL SECURITY AND PUBLIC PENSIONS

Discipline

• ECONOMICS: ECONOMICS

• Publisher: Committee for Economic Sciences of the Hungarian Academy of Sciences
• Journal: Kozgazdasagi Szemle (Economic Review)
• Year: 2009
• Volume: 56
• Issue: 2
• Pages: 101-118
• Document type: ARTICLE

Contributors

author

Simonovits Andras

• Andras Simonovits, no address given, contact the journal editor

Identifiers

CEJSH db identifier

10HUAAAA078722