Simple Models of Income Redistribution

The rising role of intra- and intergenerational transfers (e.g. basic income, child benefit and public pensions) characterises modern economies, yet most models depicting these transfers are too sophisticated for a wider but mathematically trained audience. This book presents simple models to fill the gap. The author considers a benevolent government maximizing social welfare by anticipating citizens’ shortsighted reaction to the transfer rules. The resulting income redistribution is analyzed for low tax morale, strong labor disutility and heterogeneous life expectancy. Key issues that the book addresses include the socially optimal pension contribution rate, retirement age, and redistribution programs. The author concludes by removing some strong restrictions and introducing median voter, incomplete information and dynamic complications.

Andras Simonovits is Professor Emeritus at the Institute of Economics, Hungarian Academy of Sciences. During his career he has taught at various universities including Boston University, University of Illinois, Tilburg University and Louvain-la-Neuve. In 2007, he received the Officer Cross of the Republic of Hungary. His research interests include Priority Queuing, Linear Models, Decentralized Control, Macromodels of the Socialist Economies, Overlapping Generations, and Pension Systems. Recently his main research interest is Modelling Pension Systems, especially designing good pension rules for flexible retirement. In addition to publishing several dozen papers and book chapters, he has published three books previously with Palgrave Macmillan.