Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/270330 
Authors: 
Year of Publication: 
2022
Series/Report no.: 
IMK Working Paper No. 214
Publisher: 
Hans-Böckler-Stiftung, Institut für Makroökonomie und Konjunkturforschung (IMK), Düsseldorf
Abstract: 
Population aging imposes a challenge for the public pension systems in many developed countries. The solvency of the pension system requires a broad set of policy measures. The paper addresses the following question: What are the macroeconomic consequences of increasing the social security contribution rate in Germany? The question is answered theoretically by setting up a two-period partial equilibrium overlapping generations (OLG) model and analyzing the impact of a marginal increase in the contribution rate on the worker's optimal labor supply. The key finding is that the labor supply response crucially depends on the model assumptions regarding: 1) the relative magnitudes of the population growth rate and the real rate of return on private saving, 2) the individual's utility function; and 3) the labor income tax and the pension benefit function. In case of a linear labor income tax and earnings-dependent pensions, which approximate the current German pension system, the theory predicts a rise in employment in response to a payroll tax increase for a conventional specification of the utility function and a plausible parameterization of the model parameters.
Subjects: 
Population aging
Public pension program
Pension reform
Labor taxation
JEL: 
D3
E6
H2
H3
Creative Commons License: 
cc-by Logo
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.