In the NZZ, Michael Schaefer reports about a study that analyzes the portfolio composition of public sector entities and social security institutions. Cantons and the Federation mostly hold cash. The SNB’s portfolio is among the riskiest.
Tag Archives: Social security
Tax Wedges
The average tax wedge in OECD countries has been stable over the last 15 years, at roughly 36 percent. OECD data.
From The Economist, a decomposition in the cross section:
“Politico-Economic Equivalence,” RED, 2015
Review of Economic Dynamics 18(4), October 2015, with Martín Gonzalez-Eiras. PDF.
Traditional “economic equivalence” results, like the Ricardian equivalence proposition, define equivalence classes over exogenous policies. We derive “politico-economic equivalence” conditions that apply in environments where policy is endogenous and chosen sequentially. A policy regime and a state are equivalent to another such pair if both pairs give rise to the same allocation in politico-economic equilibrium. The equivalence conditions help to identify factors that render institutional change non-neutral and to construct politico-economic equilibria in new policy regimes. We exemplify their use in the context of several applications, relating to social security reform, tax-smoothing policies and measures to correct externalities.
The Purple Plans
Laurence Kotlikoff appeals to “fellow economists and concerned citizens” to endorse plans for
- reform of the tax system: www.thepurpletaxplan.org;
- reform of the health care system: www.thepurplehealthplan.org;
- reform of the social security system: www.thepurplesocialsecurityplan.org;
- an overhaul of banking: www.thepurplefinancialplan.org;
- intergenerational fairness: www.thepurplegenerationalbalanceplan.org;
- an energy tax: www.thepurpleenergyplan.org;
- a reform of the education system: www.thepurpleeducationplan.org.
“Riskante Renten (Risky Entitlements),” FuW, 2013
Finanz und Wirtschaft, January 5, 2013. PDF. Ökonomenstimme, January 8, 2013. HTML.
- Future pension benefits will reflect future national income, and how generations share it.
- Future income depends on current savings and thus, the structure of the pension system.
- How the income is shared depends on political factors, not promises.
“Economic and Politico-Economic Equivalence,” CEPR, 2012
CEPR Discussion Paper 9203, November 2012, with Martín Gonzalez-Eiras. PDF.
We extend “economic equivalence” results, like the Ricardian equivalence proposition, to the political sphere where policy is chosen sequentially. We derive conditions under which a policy regime (summarizing admissible policy choices in every period) and a state are “politico-economically equivalent” to another such pair, in the sense that both pairs give rise to the same equilibrium allocation. The equivalence conditions help to identify factors that render institutional change non-neutral. We exemplify their use in the context of several applications, relating to social security reform, tax-smoothing policies and measures to correct externalities.
“The Future of Social Security,” JME, 2008
Journal of Monetary Economics 55(2), March 2008, with Martín Gonzalez-Eiras. PDF.
We analyze the effect of the projected demographic transition on the political support for social security, and equilibrium outcomes. Embedding a probabilistic-voting setup of electoral competition in the standard OLG model with capital accumulation, we find that intergenerational transfers arise in the absence of altruism, commitment, or trigger strategies. Closed-form solutions predict population ageing to lead to higher social security tax rates, a rising share of pensions in GDP, but eventually lower social security benefits per retiree. The response of equilibrium tax rates to demographic shocks reduces old-age consumption risk. Calibrated to match features of the U.S. economy, the model suggests that, in response to the projected demographic transition, social security tax rates will gradually increase to 16%. Other policies that distort labor supply will become less important; labor supply therefore will rise, in contrast with frequently voiced fears.