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Private Savings (private + savings)

Distribution by Scientific Domains
Business, Economics, Finance and Accounting100%

Selected Abstracts

Retirement Incomes: Private Savings versus Social Transfers

THE MANCHESTER SCHOOL, Issue 5 2000
John Creedy
It has long been known, from the work of Samuelson and Aaron, that if (approximately) the sum of the population and real earnings growth rates exceeds the real interest rate, all individuals can be made better off by using a pay-as-you-go pension scheme. The basic overlapping generations model that is typically used to examine such intergenerational transfers makes no allowance for labour supply responses to taxes and transfers, and so cannot be used to examine optimal tax and pension levels. The present paper allows for labour supply effects, whereby a tax imposed to finance current pensions introduces distortions to labour supply and a reduction in the tax base. The optimal proportional tax rate, and therefore the optimal combination of private savings and social transfers, is derived in terms of the time preference rate, the taste for leisure, real interest and productivity and population growth rates. It is found that the condition under which the optimal tax is positive is the same as the Samuelson,Aaron condition. A crucial ingredient in obtaining this result is an assumption that pension levels are adjusted in line with the growth of wage rates rather than, for example, being held constant in real terms. This in turn is found to imply that earnings grow at the same rate as the wage, so long as preferences are such that leisure can be expressed as a proportion of full income. [source]

Lessons for an ageing society: the political sustainability of social security systems

ECONOMIC POLICY, Issue 38 2004
Vincenzo Galasso
SUMMARY Politics, ageing and pensions What is the future of social security systems in OECD countries? We suggest that the answer belongs to the realm of politics, and evaluate how political constraints and ageing shape the social security system. The increasing ratio of retirees to workers lowers the rate of returns of unfunded pay-as-you-go social security, and induces citizens to prefer smaller such systems and a larger role for private savings. An ageing electorate, however, increases the relevance of pension spending on the agenda of office-seeking policy-makers and tends to increase the size of unfunded pension systems. Calibrating the strength of these effects for France, Germany, Italy, Spain, the UK and the US, we find that the latter political aspect always outweighs the former. The relative size of the effects depends on country-specific characteristics and modelling details: when labour market distortions are accounted for the political effect still dominates but becomes less sizeable; the different redistributive character of pension systems and the strength of family ties also play a role in determining politico-economic outcomes. A higher effective retirement age always decreases the size of the system chosen by the voters, often increases its generosity, and may be the only viable solution to pension system problems in the face of population ageing. [source]

Retirement Incomes: Private Savings versus Social Transfers

THE MANCHESTER SCHOOL, Issue 5 2000
John Creedy
It has long been known, from the work of Samuelson and Aaron, that if (approximately) the sum of the population and real earnings growth rates exceeds the real interest rate, all individuals can be made better off by using a pay-as-you-go pension scheme. The basic overlapping generations model that is typically used to examine such intergenerational transfers makes no allowance for labour supply responses to taxes and transfers, and so cannot be used to examine optimal tax and pension levels. The present paper allows for labour supply effects, whereby a tax imposed to finance current pensions introduces distortions to labour supply and a reduction in the tax base. The optimal proportional tax rate, and therefore the optimal combination of private savings and social transfers, is derived in terms of the time preference rate, the taste for leisure, real interest and productivity and population growth rates. It is found that the condition under which the optimal tax is positive is the same as the Samuelson,Aaron condition. A crucial ingredient in obtaining this result is an assumption that pension levels are adjusted in line with the growth of wage rates rather than, for example, being held constant in real terms. This in turn is found to imply that earnings grow at the same rate as the wage, so long as preferences are such that leisure can be expressed as a proportion of full income. [source]

External Dependent Economy and Structural Real Estate Bubbles in China

CHINA AND WORLD ECONOMY, Issue 1 2008
Lijian Sun
E44; F32; F41; G11 Abstract This study explores the relationship between external dependent economic structure, surplus monetary liquidity and real estate bubbles in China. Employing monthly data from 28 Chinese provinces over the period 2004-2005, we test whether real estate bubbles are caused by structural surplus monetary liquidity, controlling other possible factors. Our empirical findings show that the growth of private savings in the banking sector, as an index of surplus monetary liquidity, ferments real estate bubbles regardless of the different development level across the 28 provinces. [source]