This paper investigates the dynamic consequences of demographic change and various pension reform scenarios for Austria. The analysis is based on a computable overlapping-generations model with life-cycle labor supply, savings, and search unemployment. The public sector is decomposed into general government and an unfunded pension system with a tax - benefit linkage. Our quantitative analysis considers several pension reform scenarios on top of the demographic transition in an aging society. We find that lowering the pension replacement rate and increasing the retirement age can have strong labor-market effects. They strengthen the labor supply both with respect to job search intensity, leading to lower unemployment rates, and with respect to hours worked.
This paper investigates the labor market impact of four often proposed
policy measures for sustainable pensions: strengthening the tax benefit link, moving from wage to price indexation of benefits, lengthening calculation periods, and introducing more actuarial fairness in pension assessment. We consider the impact on three margins of aggregate labor supply, retirement behavior, job search, and hours worked.We provide some analytical results and use a computational model to demonstrate the economic impact of recent pension reform in Austria. Reducing the distortion in the retirement decision by introducing pension supplements and discounts conditional on the chosen retirement date promises the largest gains.We also find that the pension reform is far from sufficient to offset the fiscal implications of projected demographic change in Austria.
The paper develops an overlapping generations model with probabilistic aging of households. We define age as a set of personal attributes such as earnings potential, health and tastes that are characteristic of a person's position in the life-cycle. In assuming a limited number of different states of age, we separate the concepts of age and time since birth. Agents may retain their age characteristics for several periods before they move with a given probability to another state of age. Different generations that share the same age characteristics are aggregated analytically to a low number of age groups. The probabilistic aging model thus allows for a very parsimonious yet rather accurate approximation of demographic change and of life-cycle differences in earnings, wealth and consumption. Existing classes of overlapping generations models follow as special cases.
This paper provides a theory of incorporation and taxation that emphasizes
the role of the corporate legal form in facilitating access to external capital
and the potential advantages of limited liability. Incorporation relaxes financing
constraints and makes corporations larger than comparable non-corporate
firms. For the same reason, a tax on corporations imposes a smaller first-order
welfare loss than a tax on non-corporate firms. We study the consequences of
tax reform and compare the role of taxation with other institutional reforms.
This paper provides theory and firm-level evidence on the incorporation decision of entrepreneurs in a model of corporate governance and taxation. The theory explains how the incorporation decision of entrepreneurs is driven by taxation (corporate and personal income taxes), corporate transparency, access to external capital and limited liability. We estimate features of this model using a large cross-section of more than 540, 000 firms in European manufacturing. The impact of taxation on the incorporation decision is at the heart of this analysis. We find that higher personal income tax rates and their progression are associated with an increase in the probability of incorporation, while higher corporate tax rates entail an impediment to incorporate. This finding is robust to the inclusion of other economic and institutional determinants and to a variety of functional form assumptions about the latent variable in the estimated discrete choice model.
This paper provides a theory of incorporation and taxation that emphasizes
the role of the corporate legal form in facilitating access to external capital
and the potential advantages of limited liability. Incorporation relaxes financing
constraints and makes corporations larger than comparable non-corporate
firms. For the same reason, a tax on corporations imposes a smaller first-order
welfare loss than a tax on non-corporate firms. We study the consequences of
tax reform and compare the role of taxation with other institutional reforms.
