ABSTRACT
This chapter explores whether or not the contributions to public pension scheme in the pay-as-you-go system should be substituted by general taxes, e.g. a progressive labor income tax or a consumption tax. The chapter also investigates whether or not such possible integration of tax and social security systems is desirable from the aspects of both efficiency and equity. To analyze the problem, we adopt an extended lifecycle general equilibrium model of overlapping generations with heterogeneity in the ability of labor supply, using the household expenditure survey data. The simulation results indicate that a progressive expenditure tax with full integration is the most desirable policy.
