Is there a Political Support for the Double Burden on Prolonged Activity?

In many countries elderly workers are subject to a double distortion when they consider prolonging their activity: the payroll tax and a reduction in their pension rights. It is often argued that such a double burden would not be socially desirable. We consider a setting where it would be rejected by both a utilitarian and a Rawlsian social planner. Furthermore, each individual would also reject it as a citizen candidate. We show that the double burden may nevertheless be (second-best) Pareto efficient and can be supported by a particular structure of social weights biased towards the more productive workers. The paper has been presented at the “Atelier Retraites”, Bordeaux, October 2003. We would like to thank the participants and in particular our discussant, Ronan Mahieu, for their remarks. We are also grateful to our two referees who provided detailed and constructive comments and suggestions. Support for this research project has been provided by the European RTN program through the FINRET network