Lifetime income redistribution by social security

Abstract

This paper discusses the redistributive impact of the Dutch social security system on lifetime basis. Net benefits appear to be positive for the birth generations up to 1960. Social insurances show a declining net benefit, whereas for occupational pensions the reverse holds. It is generally assumed that flat-rated social security schemes are more redistributive ones than wage-related schemes. However, the Dutch social security system shows that on a lifetime basis the redistributive impact of flat-rated general insurances does not necessarily largely differ from the wage-related employee insurances. Social assistance schemes result in a very large income redistribution in view of the small amounts involved. Social insurances and social assistance schemes have an income equalizing effect. On the contrary, occupational pensions increase income inequality.

Annual versus lifetime income redistribution by social security

“…The current definition of social security (in its broad sense) in the Netherlands, considers social security as the totality of legal measures which are aimed at guaranteeing continuity in the Nelissen (1991Nelissen ( , 1993Nelissen ( and 1994] -is a dynamic cross-sectional model.…”

“…Using a real sample of individuals and households along with their attributes would have been preferable, however, such a sample is not available. A first useable sample can be derived from the 1947 Census data [see Nelissen (1991 and1994)]. So, the model simulates all events from 1947.…”

“…Here, this problem has been solved for the Netherlands by using microsimulation. The applied model, called NEDYMAS -which stands for NEtherlands DYnamic Micro-Analytic Simulation model [see Nelissen (1991Nelissen ( , 1993Nelissen ( and 1994] -is a dynamic cross-sectional model. The resulting income components have been adjusted for the household composition (via the equivalence scale) and the resulting amounts have been adjusted for changes in the wage index and discounted to 1990, using a discount rate of 4 q.…”

Microsimulation for Local Impact Analysis: an Application to Plant Shutdown*

“…These complicated relationships can be represented with modern object-oriented programming languages in a way that is elegant, simple, and computationally efficient (Ballas and Clark, 2001). Nelissen (1994) argues that microsimulation's benefits stem from their ability to incorporate the so-called second-order (induced behavioral effects) effects in addition to the usual first-order (direct effects due to policy change) effects. One ramification is that household processes (i.e., demographic processes) ''are of greater importance to individual income development than socio-economic changes such as becoming unemployed'' (Nelissen, 1994, p. 3).…”

“…Microsimulation was introduced nearly a half century ago by Orcutt (1957) and has experienced a revival in the social sciences over the past decade (Merz, 1991;Clarke, 1996;Isard et al 1998;Williamson, 1999). It has been used in national-level population projection studies (Fredriksen, 1998), to investigate social security/pension contributions and benefits (Favreault and Caldwell, 2000;Nelissen, 1994;Andreassen, Fredriksen, and Ljones, 1996;Zedlewski, 1990), to examine the effect of various tax regimes on fiscal budgeting and inequality (Klevmarken and Olovsson, 1996), to analyze support networks and retirement care needs as the population ages (Williamson, 1996;Galler, 1997;Hancock, 2000), to examine educational and health issues (Caldwell, 1996;Harding, 2000), to study wealth distribution (Caldwell, Clarke, and Keister 1998), and to assess housing policy (Oskamp, 1995). Recent microsimulation modeling efforts have also been made to examine spatial processes (Ballas and Clarke, 2001;Caldwell, Clarke, and Keister, 1998;Clarke, 1996;Holm et al, 2002).…”