Working Paper Series
Social Insurance Based on Personal Savings Accounts: A possible reform strategy for overburdened welfare states?
Abstract: In spite of some cutbacks in entitlements, many welfare
states' spending has continuously increased over the past decades, leading
to larger tax burdens and often higher marginal tax rates. Proposals for
reform often focus on reduced social insurance benefits and more actuarial
insurance premia. In this paper it is shown that such reforms may have a
smaller potential for reducing the marginal tax rate than commonly assumed,
unless they are combined with mandatory personal savings accounts. Social
insurance based on personal savings account is compared to other systems in
a simple theoretical model and in a simulation within the context of
Swedish social insurance. The simulation indicates that marginal tax
effects can be reduced significantly by social insurance based on savings
accounts without affecting life-tim income distribution much.
Keywords: WELFARE STATE; SOCIAL INSURANCE; (follow links to similar papers)
JEL-Codes: D60; D63; D69; (follow links to similar papers)
40 pages, March 1996
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