In many countries elderly workers are subject to a double distortion when they consider prolonging their activity: the payroll tax and a reduction in their pension rights. It is often argued that such a double burden would not be socially desirable. We consider a setting where it would be...

Should special pension provisions be offered to workers in harsh occupations? We address this question in an optimal tax setting where individuals differ in longevity and occupation. Longevity is private information but workers in harsh occupations have on average shorter lifes than workers in...

We study the optimal design of a social security system when individuals differ in health status and occupation. The health status is private information but is imperfectly correlated with occupation: individuals in harsh occupations have a higher probability of being in poor health. We explore...

In many countries pension systems involve some form of earnings test; i.e., an individual’s benefits are reduced if he has labour income. This paper examines whether or not such earning tests emerge when pension system and income tax are optimally designed. We use a simple model with...

The analysis provides a new explanation for two widespread problems concerning European unemployment policy: the disappointingly small effect of many past reform measures on unemployment; and the political difficulties in implementing more extensive reform programmes. We argue that the heart of...

This paper shows that the combination of habit formation - present consumption creating additional consumption needs in the future - and myopia may explain why some retirees are forced to 'unretire', i.e., unexpectedly return to work. It also shows that when myopia about habit formation leads to...

The paper examines the possible effects of introducing a large-scale welfare reform in Sweden, namely, the introduction of comprehensive welfare accounts. Under this policy, individuals make mandatory contributions to accounts, which they can top up with voluntary contributions. In return,...

This paper explores the optimal risk sharing arrangement between generations in an overlapping generations model with endogenous growth. We allow for nonseparable preferences, paying particular attention to the risk aversion of the old as well as overall 'life-cycle' risk aversion. We provide a...

Social insurance for the elderly is judged responsible for the widely observed trend towards early retirement. In a world of laissez-faire or in a first-best setting, there would be no such trend. However, when first-best instruments are not available, because health and productivity are not...

We completely characterize the set of second-best optimal "menus" of student-loan contracts in a simple economy with risky labour-market outcomes, adverse selection, moral hazard and risk aversion. The model combines structured student loans and an elementary optimal income-tax problem à la...