In his keynote speech for the welfare workshop, Anthony Atkinson illustrated the European poverty problem and brought it together with the analysis of its economic cost. He raised promising research questions in refining the analysis of both poverty - how to treat needs, how to count people, how to compare poverty - and its economic impact. He also highlighted the importance of adequate policy parameters. Unlike European monetary policy, poverty alleviation so far has no common central institution.
Several of the papers presented at the workshop concerned the topic of pension reform. Berthold Wigger argued in favour of intergenerational transfers from the working population to the retired in order to compensate for the externality. Such an externality arises in endogenous growth models if investment raises future labour productivity. He suggested that the already existing pay-as-you-go scheme constitutes a formidable basis to engineer an investment subsidy. Often it is argued that a mix between funded and unfunded pensions is needed to insure against unforeseen productivity shocks. Jakob von Weizsaecker hinted at the fact that at least with a Cobb-Douglas production function, returns to pay-as-you-go and funded systems are perfectly correlated. Therefore, uncertainty might not be such a strong argument for introducing a mixed pension system. Monika Buetler used the experience gained from a Swiss ballot to show that an increase in the retirement age seems politically feasible. A somewhat puzzling finding was that language had a huge impact on voting outcomes. French and Italian cantons favoured an increase in retirement age whereas German-speaking cantons rejected it. Karen Feist provided us with a generational accounting perspective of the German pension reform. She came to the conclusion that partial funding of the German pension system is a powerful strategy to reduce the fiscal burden on future generations. Efraim Sadka put the pension problem into an international perspective. He argued that migration of unskilled workers is beneficial to all income and age groups when the economy has good access to capital markets, so that migration exerts no major effect on factor prices. And even if wages fall as a consequence of unskilled immigration, the overall effect may be positive for the receiving economy. John Piggott investigated retirement payouts in the Australian annuity market. To avoid adverse selection effects the conversion of savings into annuities should be uniform across retirees. In simulation studies he came to the conclusion that the most preferable annuity scheme is one where the payouts are variably adjusted to the performance of the underlying portfolio.
Other topics raised in the welfare workshop were varied. Alessandro Cigno pointed out that we put too little effort into raising our children. Each family underestimates the value of education as, due to the tax system, a large fraction of the future benefits of a larger human capital will accrue to other members in society. This raises the question of how governments should design transfers to families with children. Among Cigno's policy recommendations were transfers that are conditioned on child performance. Vesa Kanniainen presented evidence in support of the view that non-diversifiable economic risks determine the equilibrium allocation between entrepreneurs and employees. Social insurance, which could mitigate some of the economic risks, turned out to be detrimental to entrepreneurship. Finally, Regina Riphahn alarmed us with the fact that hidden poverty in Germany amounts to about 60% of households eligible for social assistance. Using German panel data, she showed that application costs and stigma effects decrease the take-up of social assistance. If all eligible households took up their benefits, transfer payments would increase by 16%. Her finding that take-up of social assistance increases with the expected duration and the amount of transfers is also nicely in line with the theoretical predictions.
Keynote Speech:
ANTHONY ATKINSON Poverty and the welfare state under pressure. See abstract.
The following papers were presented at the workshop:
Names in captials presented the papers.
Click here to see the detailed programme for the workshop.
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