Efficient redistribution in Vilnius

Efficient redistribution in Vilnius

Annual winter meeting in Vilnius attracts Lithuanians from around the world to present their ongoing work. Being honorary Lithuanians :), we were invited to present our work on redistribution in social security and tax progression. As always in Vilnius, we got plenty of interesting comments and questions. The paper asks if one can replace redistribution in social security with redistribution in labor taxation. The former comes at the expense of efficiency loss, which is why some social security reform can be beneficial. We show both theoretically and qualitatively, that for plausible calibrations of the US economy, welfare improvement can be plausibly achieved in the United States. We also show that rising longevity improves the welfare account.