Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/108171
Authors: 
Simonovits, András
Year of Publication: 
2009
Series/Report no.: 
IEHAS Discussion Papers MT-DP - 2009/27
Abstract: 
We analyze underreported earnings and age-specific income redistribution in postsocialist economies. Pensions, other transfers and public expenditures are financed from contributions and wage taxes, respectively. We derive the reported earnings and savings from individual utility maximization, when workers overly discount the future, obtain partial satisfaction from reporting earnings, cannot be excluded from the use of public services. The government maximizes a utilitarian social welfare function, corrected for discounting and taking into account the utility of public services. An optimal proportional pension system - complemented by appropriate means-testing - provides higher welfare than any system containing a significant flat component.
Subjects: 
reporting earnings
proportional (contributional) pension
flat pension
progressive wage tax
redistribution
JEL: 
H55
D91
ISBN: 
978-963-9796-86-7
Document Type: 
Working Paper

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