DP4706 Is There a Political Support for the Double Burden on Prolonged Activity?
|Author(s):||Georges Casamatta, Helmuth Cremer, Pierre Pestieau|
|Publication Date:||October 2004|
|Keyword(s):||implicit taxation, pensions, retirement age|
|Programme Areas:||Public Economics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=4706|
In many countries elderly workers are subject to a double distortion when they consider prolonging their activity: the payroll tax and a reduction in their pension rights. It is often argued that such a double burden would not be socially desirable. We consider a setting where it would be rejected by both a utilitarian and a Rawlsian social planner. Furthermore, each individual would also reject it as a citizen candidate. We show that the double burden may nevertheless be (second-best) Pareto efficient and can be supported by a particular structure of social weights biased towards the more productive workers.