Efficient redistribution of lifetime income through welfare acccounts

A. Lans Bovenberg; Martin Ino Hansen; Peter Birch Sørensen

doi:10.1111/j.1475-5890.2012.00151.x

Efficient redistribution of lifetime income through welfare acccounts

A. Lans Bovenberg, Martin Ino Hansen, Peter Birch Sørensen

Department of Economics

1 Citation (Scopus)

Abstract

Compared with a conventional tax-transfer system, individual welfare accounts can redistribute lifetime incomes at a lower efficiency cost. These welfare accounts employ mandatory contributions rather than taxes to finance social transfers to people of working age. We describe a design for welfare accounts that guarantees a Pareto improvement if behavioural responses to the accounts improve the public budget. We also develop a formula for quantifying the impact of welfare accounts on the government budget and economic efficiency. Applying the formula to Danish data, we find that the proposed welfare accounts would generate a Pareto improvement, thus improving the trade-off between equity and efficiency. We discuss how the gains from welfare accounts can be distributed in an equitable manner.

Original language	English
Journal	Fiscal Studies
Volume	33
Issue number	1
Pages (from-to)	1-37
Number of pages	37
ISSN	0143-5671
DOIs	https://doi.org/10.1111/j.1475-5890.2012.00151.x
Publication status	Published - Mar 2012

Keywords

Faculty of Social Sciences

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10.1111/j.1475-5890.2012.00151.x

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abstract = "Compared with a conventional tax-transfer system, individual welfare accounts can redistribute lifetime incomes at a lower efficiency cost. These welfare accounts employ mandatory contributions rather than taxes to finance social transfers to people of working age. We describe a design for welfare accounts that guarantees a Pareto improvement if behavioural responses to the accounts improve the public budget. We also develop a formula for quantifying the impact of welfare accounts on the government budget and economic efficiency. Applying the formula to Danish data, we find that the proposed welfare accounts would generate a Pareto improvement, thus improving the trade-off between equity and efficiency. We discuss how the gains from welfare accounts can be distributed in an equitable manner.",

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AU - Bovenberg, A. Lans

AU - Hansen, Martin Ino

AU - Sørensen, Peter Birch

N1 - JEL Classification: H53;H55

PY - 2012/3

Y1 - 2012/3

N2 - Compared with a conventional tax-transfer system, individual welfare accounts can redistribute lifetime incomes at a lower efficiency cost. These welfare accounts employ mandatory contributions rather than taxes to finance social transfers to people of working age. We describe a design for welfare accounts that guarantees a Pareto improvement if behavioural responses to the accounts improve the public budget. We also develop a formula for quantifying the impact of welfare accounts on the government budget and economic efficiency. Applying the formula to Danish data, we find that the proposed welfare accounts would generate a Pareto improvement, thus improving the trade-off between equity and efficiency. We discuss how the gains from welfare accounts can be distributed in an equitable manner.

AB - Compared with a conventional tax-transfer system, individual welfare accounts can redistribute lifetime incomes at a lower efficiency cost. These welfare accounts employ mandatory contributions rather than taxes to finance social transfers to people of working age. We describe a design for welfare accounts that guarantees a Pareto improvement if behavioural responses to the accounts improve the public budget. We also develop a formula for quantifying the impact of welfare accounts on the government budget and economic efficiency. Applying the formula to Danish data, we find that the proposed welfare accounts would generate a Pareto improvement, thus improving the trade-off between equity and efficiency. We discuss how the gains from welfare accounts can be distributed in an equitable manner.

KW - Faculty of Social Sciences

KW - social insurance

KW - welfare accounts

KW - lifetime income distribution

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DO - 10.1111/j.1475-5890.2012.00151.x

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VL - 33

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EP - 37

JO - Fiscal Studies

JF - Fiscal Studies

IS - 1

ER -

Efficient redistribution of lifetime income through welfare acccounts

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Keywords

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