Ecole des HEC-DEEP
Thèse de doctorat en Sciences Economiques mention "économie politique"

Olivia HUGUENIN

Topics in Public Finance: Social Security and Taxation

Directrice : Monika Bütler
Imprimatur : mars 2006

Summary
This work focuses in three parts on the field of public finance, thus on the spending and taxing activities of governments. The first two parts deal with issues on social security, the third part analyzes the perceived value of tax competition.
Part one deals with the current problem of increased early retirement by focusing on Switzerland as a special case. We argue that the wealth effect plays an important role in the retirement decision for middle and high income earners.
We provide evidence using a unique dataset on individual retirement decisions in Swiss pension funds, allowing us to perfectly control for pension scheme details. Our findings suggest that affordability is a key determinant in the retirement decisions.
Part two covers the theoretical side of social security. In a within cohort social security model, we introduce disability insurance with an imperfect screening mechanism. We then vary the wealth level of a model economy and analyze how the optimal social security benefit structure or equivalently, the optimal replacement rates, changes depending on the wealth level of the economy. We find that richer economies should optimally have higher replacement rates than poorer economies. On the other hand the labor force participation of richer economies is very low.
Finally, part three turns to the income of governments, by adding an element to the controversy on tax competition versus tax harmonization. To explore the value citizens attach to tax competition we analyze a unique popular vote for a complete tax harmonization between communities in the third largest Swiss canton Vaud. Although a majority of voters would have seemingly benefited from replacing the current tax rate by a revenue-neutral average tax rate, the proposal was rejected by a large margin. Our estimates suggest that the estimated combined perceived benefit from tax competition is in the range of 10%.