In a two-period model with uncertainty about life expectancy, we analyze several measures that are typically included in a social security reform: tax incentives for private life annuities, a cut in the social security benefits, and an increase in the social security tax. First, we look at the...

The paper analyzes the optimal income taxation policy when inequity aversion exists among taxpayers. The influence of inequity aversion on the optimal income tax scheme depends on whether taxpayers are concerned about inequality in wages or in rents (i.e., wages minus effort costs). If agents...