Details
| Original language | English |
|---|---|
| Pages (from-to) | 233-239 |
| Number of pages | 7 |
| Journal | Journal of public economics |
| Volume | 77 |
| Issue number | 2 |
| Early online date | 25 May 2000 |
| Publication status | Published - Aug 2000 |
Abstract
According to a widely held belief, compulsory savings are justified on efficiency grounds because they alleviate the following free rider problem: if the welfare state grants a minimum income to older persons, some of the young may find it optimal not to provide for retirement. The literature argues that compulsory savings can be used in order to overcome this problem. However, potential free riders consider compulsory savings as if they were payroll taxes; this holds even if the pension system is actuarially fair. If the resulting labour market distortions are important, it is optimal to accept the free rider problem rather than to introduce a compulsory pension system.
Keywords
- Compulsory savings, H55, Welfare state
ASJC Scopus subject areas
- Economics, Econometrics and Finance(all)
- Finance
- Economics, Econometrics and Finance(all)
- Economics and Econometrics
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In: Journal of public economics, Vol. 77, No. 2, 08.2000, p. 233-239.
Research output: Contribution to journal › Article › Research › peer review
}
TY - JOUR
T1 - Compulsory savings in the welfare state
AU - Homburg, Stefan
PY - 2000/8
Y1 - 2000/8
N2 - According to a widely held belief, compulsory savings are justified on efficiency grounds because they alleviate the following free rider problem: if the welfare state grants a minimum income to older persons, some of the young may find it optimal not to provide for retirement. The literature argues that compulsory savings can be used in order to overcome this problem. However, potential free riders consider compulsory savings as if they were payroll taxes; this holds even if the pension system is actuarially fair. If the resulting labour market distortions are important, it is optimal to accept the free rider problem rather than to introduce a compulsory pension system.
AB - According to a widely held belief, compulsory savings are justified on efficiency grounds because they alleviate the following free rider problem: if the welfare state grants a minimum income to older persons, some of the young may find it optimal not to provide for retirement. The literature argues that compulsory savings can be used in order to overcome this problem. However, potential free riders consider compulsory savings as if they were payroll taxes; this holds even if the pension system is actuarially fair. If the resulting labour market distortions are important, it is optimal to accept the free rider problem rather than to introduce a compulsory pension system.
KW - Compulsory savings
KW - H55
KW - Welfare state
UR - http://www.scopus.com/inward/record.url?scp=0042780897&partnerID=8YFLogxK
U2 - 10.1016/S0047-2727(99)00106-1
DO - 10.1016/S0047-2727(99)00106-1
M3 - Article
AN - SCOPUS:0042780897
VL - 77
SP - 233
EP - 239
JO - Journal of public economics
JF - Journal of public economics
SN - 0047-2727
IS - 2
ER -