Determinants of the Welfare State Dependency Ratio, Wage 福利国家依赖率决定因素，工资.pptVIP

Determinants of the Welfare State: Dependency Ratio, Wage Gap and Low-Skill Migration Assaf Razin, Efraim Sadka, Phillip Swagel Tax-Transfer Policy in a Political-Economy Equilibrium Two types of workers: skilled workers who have high productivity and provide one efficiency unit of labor per each unit of labor time, and unskilled workers who have low productivity and provide only q1 efficiency units of labor per each unit of labor time. Workers have one unit of labor time during their first period of life, but are born without skills and thus with low productivity. There is a continuum of individuals, characterized by an innate ability parameter, e, which is the time needed to acquire an education. We assume also a positive pecuniary cost of acquiring skills, , which is not tax deductible. The cumulative distribution function of innate ability is denoted by G(e), with the support being the interval [0,1]. The density function is denoted by g=G′. Suppose that the government levies a flat tax on labor income in order to finance a flat grant, b. A simple decision rule: Acquire skill iff Cutoff education-cost parameter: Rearranging terms gives the cutoff level for the education decisions: (1) The production function is effectively linear in labor, L, and capital, K: (2) where Y is gross output. (3) where is the size of the working age population in period t (with N0 the number of young individuals in period 0), and is the average (per worker) labor supply in period t. The government budget constraint implies: Therefore, the lump-sum grant equals: (4) For any tax rate , dependency ratio (as indicated by n) and wage gap (as indicated by q), equations (1) and (4) determine and as functions of , n, and q. The net after-tax lifetime income is given by: A young individual born in period t chooses her first- and second-period consump