Working Paper

On the Optimal Timing of Implicit Social Security Taxes Over the Life Cycle

by Robert Fenge, Silke Uebelmesser, Martin Werding


Contents: [ Abstract | Download | Contact]

• Abstract
  
  Are there still opportunities for welfare-improving reforms in unfunded pension systems? To answer this question, we analyse the inter-temporal structure of implicit taxes in pay-as-you-go pension schemes. We demonstrate that these tax rates are declining over the life cycle. This timing is optimal if periodic wage elasticities of labour supply are inversely related to the tax structure. Using German micro-data for men and married women, we estimate periodic wage elasticities of labour supply. We observe that an efficient taxation would require to implement a steeper tax profile for male workers and a “U-shaped” (or mildly N-shaped) tax profile for female workers in addition to a general reduction of the level of implicit tax rates for the latter.

  
  

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• Contact
  
  Silke Uebelmesser
  University of Munich, Department of Economics, CES, Schackstr. 4, 80539 Munich, Germany,
  eMail: uebelmesser@lmu.de

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