The welfare effects of pay-as-you-go retirement programs: the role of tax and benefit timing
Abstract: It is well known that pay-as-you-go retirement programs reduce steady-state welfare and the capital stock in dynamically efficient OLG economies. The common two-period OLG model obscures, however, the dependence of these effects on the ages at which taxes are paid and benefits are received. Program changes that shift taxes to older workers or benefits to younger retirees have effects similar to reductions in program size, yielding steady-state welfare gains and increases in capital accumulation while imposing transition costs on current generations. This analysis has policy implications for both tax and benefit timing.
File(s): File format is application/pdf http://dallasfed.org/assets/documents/research/papers/2006/wp0602.pdf
Provider: Federal Reserve Bank of Dallas
Part of Series: Working Papers
Publication Date: 2006
Pages: 27 pages
Note: Published as: Viard, Alan D. (2007), "The Welfare Effects of Pay-as-You-Go Retirement Programs: The Role of Tax and Benefit Timing," Contemporary Economic Policy 25 (2): 282-292.