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Mr. David Coady, Samir Jahan, Baoping Shang, and Riki Matsumoto
This paper provides an overview of the design of means-tested Guaranteed Minimum Income schemes, which constitute an important component of social protection systems in European countries. It discusses how key design features differ across countries, including how countries balance the primary objective of poverty alleviation against the desire to both manage the work disincentives inherent in such programs and contain fiscal cost. The analysis finds a clear trade-off between both concerns in practice, with many countries combining low generosity with low benefit withdrawal rates (BWRs) thus prioritizing employment incentives over the primary objective of poverty alleviation. Many countries can reduce this trade off by combining higher generosity with higher BWRs. Countries with very high BWRs should consider reducing these, including through allowing income disregards and time dependent (rather than income-dependent) benefit withdrawal. The work disincentives associated with higher BWRs can also be attenuated through strengthening complementary activation policies that incentivize and support participation in the labor market.
Mr. David Coady, Samir Jahan, Baoping Shang, and Riki Matsumoto

.1. Marginal Effective Tax Rates by Household Type, 2019 A2.2. Participation Tax Rates by Household Type, 2019 A3.1. Strictness of Activation Requirements in European Countries, 2017 A3.2. Labor Disincentives and Strictness of Benefit Conditionality Annex Tables A2.1. Key Features of GMI Schemes in Europe A3.1 Strictness of Activation Requirements and Components, 2017

Mr. Erik Lueth

boosting contributions to social insurance. Future generations will, therefore, be worse off than those presently living. The crucial question of this section, however, is whether the welfare loss of future relative to present generations is larger than in Section III.B , where labor disincentive effects were not taken into account. To figure this out, note that agents do not perceive the link between their work effort (1 − l t ) and their contribution rate, τ t , as specified by equation (16) , because the insurance scheme lacks equivalence between contributions

Mr. Erik Lueth

of future relative to present generations is larger than in the second part of Section II , where labor disincentive effects were not taken into account. This only holds if the distortion caused by social insurance increases as the population grows older. To examine whether this is the case, the analysis proceeds as follows. All terms of equation (17) are brought onto the left-hand side and differentiated with respect to l t , while taking into account the dependency ∂τ t / ∂ l t > 0, as specified by equation (16) . This way, one derives the real opportunity

Mr. Erik Lueth
With pay-as-you-go schemes in place, population aging will impose a heavy fiscal burden on young and future cohorts. However, these cohorts may also profit from larger inheritances as the number of heirs declines. The aim of this paper is to explore the compensating potential of private intergenerational transfers. A dynamic, computable general equilibrium model is employed allowing for a pay-as-you-go scheme, various bequest motives, and an endogenous labor supply. The findings are twofold. First, the increase in future generations' inheritances is insufficient to make up for the demographic burden. Second, increasing the inheritance tax during the demographic transition may alleviate the fiscal burden of future generations by improving overall efficiency.
Mr. David Coady, Samir Jahan, Baoping Shang, and Riki Matsumoto

increase considered (Annex I). The estimates presented below come from the OECD’s Social and Welfare Statistics database, which simulates PTRs and METRs for selected European countries in 2019. 8 Work is assumed to be remunerated at two-thirds the average wage 9 and estimates also allow for the presence of housing-related income support and in-work support to capture the overall incentives of the social protection system while also incorporating the effects of each country’s direct income tax system. Labor disincentives are based on a working-age adult changing their

Mr. Mario Catalan and Mr. Nicolas E Magud
We compare the long-term output and current account effects of pension reforms that increase the retirement age with those of reforms that cut pension benefits, conditional on reforms achieving similar fiscal targets. We show the presence of a policy trade-off. Pension reforms that increase the retirement age have a large positive effect on output, but a small (and often negative) effect on the current account. In contrast, reforms that cut pension benefits improve the current account balance but reduce output. Mixed pension reforms, which extend the working life and cut pension benefits, can simultaneously boost output and the current account.
Mr. Mario Catalan and Mr. Nicolas E Magud

(qualitative) result of this paper: the existence of a tradeoff between the output and current account effects of pension reform. 11 In standard inter-temporal models of household optimization, households increase work effort in anticipation of future (exogenous) income losses. In sharp contrast, in this model the reform reduces the return on labor effort through the pension benefit formula: a smaller replacement parameter implies that higher wage earnings in the working life result in smaller increases in the pension benefit received during retirement. The labor

Maura Francese and Delphine Prady

to reverse important structural reforms. 5 On the latter see the G20 note on the future of work, measurement and policy challenges ( IMF 2018b ). 6 Labor disincentive effects of some sort (either from income or substitution effects) are inherent in any type of transfer scheme. Unconditional transfers are generally less distortionary at the margin. However, an assessment of the distortionary impact requires a comprehensive assessment of the tax-transfer schedule, which for some type of households may be fairly complicated. 7 To frame the UBI

Maura Francese and Delphine Prady
This paper discusses the definition and modelling of a universal basic income (UBI). After clarifying the debate about what a UBI is and presenting the arguments in favor and against, an analytical approach for its assessment is proposed. The adoption of a UBI as a policy tool is discussed with regard to the policy objectives (shaped by social preferences) it is designed to achieve. Key design dimensions to be considered include: coverage, generosity of the program, overall progressivity of the policy, and its financing.