Is There a Political Support for the Double Burden on Prolonged Activity?

Casamatta, Georges; Cremer, Helmuth; Pestieau, Pierre

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Is There a Political Support for the Double Burden on Prolonged Activity?

19 Pages Posted: 29 Dec 2004

See all articles by Georges Casamatta

Georges Casamatta

Toulouse School of Economics (GREMAQ-CNRS); Centre for Economic Policy Research (CEPR)

Helmuth Cremer

University of Toulouse (GREMAQ & IDEI); Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute)

University of Liège - Research Center on Public and Population Economics; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute); Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE)

Date Written: October 2004

Abstract

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.

Keywords: Pensions, implicit taxation, retirement age

JEL Classification: H55

Suggested Citation: Suggested Citation

Casamatta, Georges and Cremer, Helmuth and Pestieau, Pierre, Is There a Political Support for the Double Burden on Prolonged Activity? (October 2004). Available at SSRN: https://ssrn.com/abstract=641203