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| Author: | Disney, R. |
| Title: | Are contributions to public pension programmes a tax on employment? |
| Journal: | Economic Policy
2004 : OCT, 39, p. 267-311 |
| Index terms: | Pensions Pay Taxation Labour Business cycles Public sector OECD |
| Language: | eng |
| Abstract: | Many studies describe the potentially adverse impact on employment of the payroll costs of financing public pension programmes (hereafter as: p-p-p). Conventionally, empirical studies treat contributions to p-p-p. as a pure tax (in, e.g. calculations of the tax wedge by OECD). However, this approach ignores any future rights to benefits that are perceived by contributors. In fact, p-p-p. contain both an 'actuarial' and a 'redistributive' component the former closer to saving, the latter a tax. The paper constructs indicators of the tax component of pension programmes, both between and within generations, across a range of OECD countries and time periods. It uses these measures in a cross-country panel analysis of the determinants of age and gender-specific economic activity rates. The results reveal robust evidence that when p-p-p. contributions are broken down into a tax component and a savings component, the tax component of the payroll contribution reduces economic activity rates among women while a higher retirement saving component has the opposite effect. |
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