To cap or not to cap on public pension

ABSTRACT

Many countries actually put a cap on their public pension so that public pension contribution and benefit no longer increase above the cap, while others do not. Should the government remove the cap on the public pension? Using an overlapping-generations model, this article finds that putting a cap on the public pension is more socially desirable than removing it.

KEYWORDS:

• Social Security tax cap
• optimal public pension cap
• public pension size
• capping public pension

JEL CLASSIFICATION:

• H55
• D30
• H21

Disclosure statement

No potential conflict of interest was reported by the authors.