Details
| Original language | English |
|---|---|
| Pages (from-to) | 47-58 |
| Number of pages | 12 |
| Journal | ECONOMICA |
| Volume | 73 |
| Issue number | 289 |
| Publication status | Published - 20 Feb 2006 |
Abstract
The rational prodigality argument, which often serves to justify social security, is considered in a second-best tax framework with endogenous labour supply. Rational prodigality renders the familiar policies time-inconsistent. I analyse time-consistent policies and show that a wage tax suffices to rule out prodigality as a rational strategy. However, by using savings subsidies the solution can be improved upon. The subsidies are shown to be decreasing in income. A social security system with increasing contributions is not needed in either case.
ASJC Scopus subject areas
- Economics, Econometrics and Finance(all)
- Economics and Econometrics
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In: ECONOMICA, Vol. 73, No. 289, 20.02.2006, p. 47-58.
Research output: Contribution to journal › Article › Research › peer review
}
TY - JOUR
T1 - Coping with rational prodigals
T2 - A theory of social security and savings subsidies
AU - Homburg, Stefan
PY - 2006/2/20
Y1 - 2006/2/20
N2 - The rational prodigality argument, which often serves to justify social security, is considered in a second-best tax framework with endogenous labour supply. Rational prodigality renders the familiar policies time-inconsistent. I analyse time-consistent policies and show that a wage tax suffices to rule out prodigality as a rational strategy. However, by using savings subsidies the solution can be improved upon. The subsidies are shown to be decreasing in income. A social security system with increasing contributions is not needed in either case.
AB - The rational prodigality argument, which often serves to justify social security, is considered in a second-best tax framework with endogenous labour supply. Rational prodigality renders the familiar policies time-inconsistent. I analyse time-consistent policies and show that a wage tax suffices to rule out prodigality as a rational strategy. However, by using savings subsidies the solution can be improved upon. The subsidies are shown to be decreasing in income. A social security system with increasing contributions is not needed in either case.
UR - http://www.scopus.com/inward/record.url?scp=33646542681&partnerID=8YFLogxK
U2 - 10.1111/j.1468-0335.2006.00447.x
DO - 10.1111/j.1468-0335.2006.00447.x
M3 - Article
AN - SCOPUS:33646542681
VL - 73
SP - 47
EP - 58
JO - ECONOMICA
JF - ECONOMICA
SN - 0013-0427
IS - 289
ER -