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...ial contribution rates have increased in most of the developed countries, and as a result, the size of the hidden (or equivalently, shadow) economy has also risen (e.g. Frey and Weck-Hannemann, 1984; =-=Schneider and Enste, 2000-=-). The most popular expression of this connection is the so-called Laffer-curve, depicting the dependence of total tax revenues on marginal tax rates. In addition, Frey and Weck-Hannemann (1984) intro...

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...and Weck-Hannemann (1984) introduced a parameter “tax morality”, which may have a quantitatively larger and statistically stronger influence on the tax revenue than the direct tax share has (cf. also =-=Friedman et al., 2000-=-). Even if one cannot measure tax morality, it is obvious that different countries with the same total tax share may have characteristically different sizes of the hidden economy. It is enough to look...

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...r, these funds are not required to provide life annuities for their members aftersretirement. Since the provision of indexed unisex life annuities by private funds is evenstheoretically unsolved (see =-=Mitchell et al., 1999-=-), it is an open issue who will provide these lifesannuities (see above). In my opinion the only solution is to centralise the pension capital atsretirement and charge a central institution to pay lif...

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...etirement account. Our approach is orthodox, because it heavily relies on time-consistency: as there is no new information, the workers do not change their saving behavior. Less orthodox models (e.g. =-=Laibson, 1998-=-; Diamond and Kőszegi, 2003) employ the hyperbolic discounting when explaining and evaluating the voluntary pension system. To give a simple example: somebody plans to pay monthly voluntary contribut...

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...rswill be pleased to contribute to it. Pillar 3 is voluntary and it only serves to satisfy the needs ofsvery precautionary savers.sThe World Bank, its experts and certain theoretical economists (e.g. =-=Feldstein, 1996-=-)spainted a very rosy picture of the impact of privatisation on the pension system. Partlysneglecting, partly eliminating the burden of already acquired pension rights (cost of transition)sand assumin...

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...as empirically, most progressive pension systems can approximately be decomposed into a sum of a flat pension and a proportional pension, also taking care of the ceiling on mandatory contribution wx (=-=Disney, 2004-=-): b(w) = min(β0 + βw, bx), yielding the maximal mandatory pension: bx = β0 + βwx. Apart from the ceiling, the mandatory pension balance is now τ = (β0 + β)µ. Indeed, a number of experts justify the e...

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...n the last decades, tax and social contribution rates have increased in most of the developed countries, and as a result, the size of the hidden (or equivalently, shadow) economy has also risen (e.g. =-=Frey and Weck-Hannemann, 1984-=-; Schneider and Enste, 2000). The most popular expression of this connection is the so-called Laffer-curve, depicting the dependence of total tax revenues on marginal tax rates. In addition, Frey and ...

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...ation. Following others, we also add another idealization to the model: there is only a wage tax but no value added tax (for the difference between income and value added taxes under tax evasion, see =-=Richter and Boadway, 2005-=-). We investigate the impact of the size and of the structure of the tax system on the reported wages of individuals with heterogeneous wages and tax moralities in a general equilibrium framework. We ...

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...P, Greece and Austria had a total tax and social security burden about 70%, while the sizes of the shadow economies were 28.5% and 8.3%, respectively. Similar phenomena can be observed in transition (=-=Schneider, 2002-=- and Lackó, 2007) and other countries. To change the income distribution, one part of the tax revenue is paid back to the individuals. The other part, called the net tax is the difference between gro...

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...s, a 'modest' 5% of the annualscontribution.) If these trends continue in the future, then a large part of the joiners will heavilyslose with respect to those who stayed in the monopillar system (cf. =-=Orbán and Palotai, 2005-=-).sConcerning (ii), a hypothetical calculation will be helpful (Table 9). It shows the expectedsrelative gains and losses for persons joining the mixed system, compared to the originalsbenefits obtain...

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...lyscompleted and judged to be successful. On the other hand, the social security, i.e. the pensionsand health system by and large remained as it was before the transition. (For an early critique,ssee =-=Kornai, 1992-=-.)sThere was a wide-spread feeling among decision-makers that to solve the short- and longrun problems of the pension system, it should also be partially privatised and prefunded. Assthe title of the ...

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...U(wi, δi, c̃i, d̃i). If the government has a more egalitarian preference, it can choose a strictly concave scalar–scalar function ψ, and rely on a generalized utilitarian social welfare function (cf. =-=Fehr et al., 2008-=-): V = I∑ i=1 fiψ(U(wi, δi, c̃i, d̃i)). The government looks for a mandatory contribution rate τ , an earmarked tax rate θ, and a pair of benefit and matching functions b(·), a(·), which maximize the ...

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...nsforming aslarge part if not the whole sum of these staggering public pension contributions into privatesones, the contribution burden can radically be reduced. According to World Bank experts (e.g.s=-=Palacios and Rocha, 1998-=-), if there were no pension reform in Hungary, then the deficit of thespension system would rich 6% of the GDP by 2050.sTo understand these plans, we should refer to the World Bank (1994) blueprint. T...

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...oland or the German point system. (ii) Because of excessive operational costs, thesaverage real yield of the private pension funds was zero between 1998 and 2005, although withssignificant variances (=-=Matits, 2008-=-). (In a strange way, most of the publications distort thissfact by neglecting the losses due to the membership fees, a 'modest' 5% of the annualscontribution.) If these trends continue in the future,...

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...pt (cash-back) can be a good approximation and becoming quite popular in transition economies by now. Nevertheless, the introduction of tax credits diminishes the burden of a negative income tax (cf. =-=Akerlof, 1978-=-). A third dimension of taxation was modeled by Varian (1980): social insurance against sickness or unemployment. Among the first modelers, Romer (1975) obtained interesting results concerning the maj...

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... strong relation between the individual tax and the resulting public health services. But the issue of unemployment or pension contributions and benefits needs a separate treatment (Baumann, 2009 and =-=Simonovits, 2009-=-, respectively), especially for countries with wage-related benefits. Of course, there are a lot of studies modeling the impact of redistribution on the labor supply in an overlapping generations mode...

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...plysdecreasing with employment until 1996s(3.3% until 10 years and through 2 and 1% dropped tos0.5% after 36 years of employment), in 1996 the last rate was raised from 0.5 to 1.5%. (Forsdetails, see =-=Augusztinovics, 1993-=- and Czúcz and Pintér, 2002).sWhile the fall in real pensions was inevitable, the poor design of the pension formula madesthis process particularly painful. Antal et al. (1995a) describe the loss of v...

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...yment until 1996s(3.3% until 10 years and through 2 and 1% dropped tos0.5% after 36 years of employment), in 1996 the last rate was raised from 0.5 to 1.5%. (Forsdetails, see Augusztinovics, 1993 and =-=Czúcz and Pintér, 2002-=-).sWhile the fall in real pensions was inevitable, the poor design of the pension formula madesthis process particularly painful. Antal et al. (1995a) describe the loss of value and distortionssin the...

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...e. thesratio of the number of pensioners to that of workers). Table 1 displays the numerical strengthsof factors determining the ratio of total pensions to output for selected years (for details, sees=-=Antal et al., 1995-=-b).s11s2. DEBATE ON PENSION REFORM AND BASIC DECISIONSsBy 1996 the Hungarian economy was stabilised, the economy started to resemble more andsmore a developed market economy. The transformation of the...