Topics in public finance: social security and taxation

Summary The field of public finance focuses on the spending and taxing activities of governments and their influence on the allocation of resources and distribution of income. This work covers in three parts different topics related to public finance which are currently widely discussed in media and politics. The first two parts deal with issues on social security, which is in general one of the biggest spending shares of governments. The third part looks at the main income source of governments by analyzing the perceived value of tax competition. Part one deals with the current problem of increased early retirement by focusing on Switzerland as a special case. Early retirement is predominantly considered to be the result of incentives set by social security and the tax system. But the Swiss example demonstrates that the incidence of early retirement has dramatically increased even in the absence of institutional changes. We argue that the wealth effect also plays an important role in the retirement decision for middle and high income earners. An actuarially fair, but mandatory funded system with a relatively high replacement rate may thus contribute to a low labor market participation rate of elderly workers. We provide evidence using a unique dataset on individual retirement decisions in Swiss pension funds, allowing us to perfectly control for pension scheme details. Our findings suggest that affordability is a key determinant in the retirement decisions. The higher the accumulated pension capital, the earlier men, and to a smaller extent women, tend to leave the workforce. The fact that early retirement has become much more prevalent in the last 15 years is a further indicator of the importance of a wealth effect, as the maturing of the Swiss mandatory funded pension system over that period has led to an increase in the effective replacement rates for middle and high income earners. Part two covers the theoretical side of social security. Theories analyzing optimal social security benefits provide important qualitative results, by mainly using one general type of an economy. Economies are however very diverse concerning numerous aspects, one of the most important being the wealth level. This can lead to significant quantitative benefit differences that imply differences in replacement rates and levels of labor supply. We focus on several aspects related to this fact. In a within cohort social security model, we introduce disability insurance with an imperfect screening mechanism. We then vary the wealth level of the model economy and analyze how the optimal social security benefit structure or equivalently, the optimal replacement rates, changes depending on the wealth level of the economy, and if the introduction of disability insurance into a social security system is preferable for all economies. Second, the screening mechanism of disability insurance and the threshold level at which people are defined as disabled can differ. For economies with different wealth levels, we determine for different thresholds the screening level that maximizes social welfare. Finally, part three turns to the income of governments, by adding an element to the controversy on tax competition versus tax harmonization.2 Inter-jurisdictional tax competition can generate at least two potential benefits or costs: On a public level, tax competition may result in a lower or higher efficiency in the production of public services. But there is also a more private benefit in the form of an option for individuals to move to a community with a lower tax rate in the future. To explore the value citizens attach to tax competition we analyze a unique popular vote for a complete tax harmonization between communities in the third largest Swiss canton, Vaud. Although a majority of voters would have seemingly benefited from replacing the current tax rate by a revenue-neutral average tax rate, the proposal was rejected by a large margin. Our estimates suggest that the estimated combined perceived benefit from tax competition is in the range of 10%.

The future of longevity: background and perspectives

In many developed countries, including Switzerland, the ongoing increase in life expectancy is driven by the mortality decline among older persons. This has important consequences for both the provision of health care and the management of pension funds. In this context, the Swiss Federal Office of Statistics mandated a small group of experts to provide a critical review on the future evolution of mortality in developed countries. The report starts with an analysis of the past trends in life expectancy. Longevity is defined here as the duration (or the length) of life as observed in population or in individuals. The oldest and still most used indicators of longevity are life expectancy at birth (LE0) at a population level, and maximum life span (MLS) at the individual level (page 9) and in healthy life expectancy (page 19). A discussion on the future evolution of mortality and health is then presented (page 27). A set of recommendations is finally proposed (page 39).

Essays on the treatment of cash flows under stochastic interest rates

Abstract This paper shows how to calculate recursively the moments of the accumulated and discounted value of cash flows when the instantaneous rates of return follow a conditional ARMA process with normally distributed innovations. We investigate various moment based approaches to approximate the distribution of the accumulated value of cash flows and we assess their performance through stochastic Monte-Carlo simulations. We discuss the potential use in insurance and especially in the context of Asset-Liability Management of pension funds.

Where will conflicts between alien and rare species occur after climate and land-use change? A test with a novel combined modelling approach

Protecting native biodiversity against alien invasive species requires powerful methods to anticipate these invasions and to protect native species assumed to be at risk. Here, we describe how species distribution models (SDMs) can be used to identify areas predicted as suitable for rare native species and also predicted as highly susceptible to invasion by alien species, at present and under future climate and land-use scenarios. To assess the condition and dynamics of such conflicts, we developed a combined predictive modelling (CPM) approach, which predicts species distributions by combining two SDMs fitted using subsets of predictors classified as acting at either regional or local scales. We illustrate the CPM approach for an alien invader and a rare species associated to similar habitats in northwest Portugal. Combined models predict a wider variety of potential species responses, providing more informative projections of species distributions and future dynamics than traditional, non-combined models. They also provide more informative insight regarding current and future rare-invasive conflict areas. For our studied species, conflict areas of highest conservation relevance are predicted to decrease over the next decade, supporting previous reports that some invasive species may contract their geographic range and impact due to climate change. More generally, our results highlight the more informative character of the combined approach to address practical issues in conservation and management programs, especially those aimed at mitigating the impact of invasive plants, land-use and climate changes in sensitive regions

Reproductive conflicts and egg discrimination in a socially polymorphic ant

The ability to discriminate against competitors shapes cooperation and conflicts in all forms of social life. In insect societies, workers may detect and destroy eggs laid by other workers or by foreign queens, which can contribute to regulate reproductive conflicts among workers and queens. Variation in colony kin structure affects the magnitude of these conflicts and the diversity of cues used for discrimination, but the impact of the number of queens per colony on the ability of workers to discriminate between eggs of diverse origin has so far not been investigated. Here, we examined whether workers from the socially polymorphic ant Formica selysi distinguished eggs laid by nestmate workers from eggs laid by nestmate queens, as well as eggs laid by foreign queens from eggs laid by nestmate queens. Workers from single- and multiple-queen colonies discriminated worker-laid from queen-laid eggs, and eliminated the former. This suggests that workers collectively police each other in order to limit the colony-level costs of worker reproduction and not because of relatedness differences towards queens' and workers' sons. Workers from single-queen colonies discriminated eggs laid by foreign queens of the same social structure from eggs laid by nestmate queens. In contrast, workers from multiple-queen colonies did not make this distinction, possibly because cues on workers or eggs are more diverse. Overall, these data indicate that the ability of F. selysi workers to discriminate eggs is sufficient to restrain worker reproduction but does not permit discrimination between matrilines in multiple-queen colonies.

Financial protection of patients through compensation of providers: the impact of Health Equity Funds in Cambodia

Public providers have no financial incentive to respect their legal obligation to exempt the poor from user fees. Health Equity Funds (HEFs) aim to make exemptions effective by giving NGOs responsibility for assessing eligibility and compensating providers for lost revenue. We use the geographic spread of HEFs over time in Cambodia to identify their impact on out-of-pocket (OOP) payments. Among households with some OOP payment, HEFs reduce the amount paid by 35%, on average. The effect is larger for households that are poorer and mainly use public health care. Reimbursement of providers through a government operated scheme also reduces household OOP payments but the effect is not as well targeted on the poor. Both compensation models raise household non-medical consumption but have no impact on health-related debt. HEFs reduce the probability of primarily seeking care in the private sector.

Impact of social structure variation on population genetics, social conflicts and life histories in ants

Summary The evolution of social structures and breeding systems in animals is a complex process that combines ecological, genetical and social factors. This thesis sheds light on important changes in population genetics, life-history and social behavior that are associated with variation in social structure in ants. The socially polymorphic ant Formica selysi was chosen as the model organism because single- and multiple-queen colonies occur in close proximity within a single large population. The shift from single- to multiple-queen colonies is generally associated with profound changes in dispersal behavior and mode of colony founding. In chapter 1, we examine the genetic consequences of variation in social structure at both the colony and population levels. A detailed microsatellite analysis reveals that both colony types have similar mating systems, with few or no queen turnover. Furthermore, the complete lack of genetic differentiation observed between single- and multiple-queen colonies provides no support to the hypothesis that change in queen number leads to restricted gene flow between social forms. Besides changes in the genetic composition of the colony, the variation in the number of queens per colony is associated with changes in a network of behavioral and life-history traits that have been described as forming a "polygyny syndrome". In chapter 2, we demonstrate that multiple-queen colonies profoundly differ from single-queen ones in terms of size, nest density and lifespan of colonies, in weight of queens produced, as well as in allocation to reproductive individuals relative to workers. These multifaceted changes in life-history traits can provide various fitness benefits to members of multiple-queen colonies. Increasing the number of queens in a colony usually results in a decreased level of aggression towards non-nestmates. The phenotype matching hypothesis predicts that, compared to single-queen colonies, multiple-queen colonies have more diverse genetically-derived cues used for recognition, resulting in a lower ability to discriminate non-nestmates. In sharp contrast to this hypothesis, we show in chapter 3 that single- and multiple-queen colonies exhibit on average similar levels of aggression. Moreover, stronger aggression is recorded between colonies of different social structure than between colonies of the same social structure. Several hypotheses propose that the evolution of multiple-queen colonies is at least partly due to benefits resulting from an increase in colony genetic diversity. The task-efficiency hypothesis holds that genetic variation improves task performance due to a more complete or more sensitive expression of the genetically-based division of labor. In .chapter 4, we evaluate if higher colony genetic diversity increases worker size polymorphism and thus may improve division of labor. We show that despite the fact that worker size has a heritable component, higher levels of genetic diversity do not result in more polymorphic workers. The smaller size and lower polymorphism levels of workers of multiple-queen colonies compared to single-queen ones further indicate that an increase in colony genetic diversity does not increase worker size polymorphism but might improve colony homeostasis. In chapter 5, we provide clear evidence for an ongoing conflict between queens and workers on sex allocation, as predicted by kin selection theory. Our data show that queens of F. selysi strongly influence colony sex allocation by biasing the sex ratio of their eggs. However, there is also evidence that workers eliminated some male brood, resulting in a population sex-investment ratio that is between the queens' and workers' equilibria. Résumé L'évolution des structures sociales et systèmes d'accouplement chez les animaux est un processus complexe combinant à la fois des facteurs écologiques, génétiques et sociaux. Cette thèse met en lumière des changements importants dans la génétique des populations, les traits d'histoire de vie et les comportements sociaux qui sont associés à des variations de structure sociale chez les fourmis. Durant ce travail, nous avons étudié une population de Formica selysi composée à la fois de colonies à une reine et de colonies à plusieurs reines. La transition de colonie à une reine à colonie à plusieurs reines est généralement associée à des changements profonds dans le comportement de dispersion ainsi que le mode de fondation des sociétés. Dans le chapitre 1, nous examinons les conséquences génétiques de la variation de structure sociale tant au niveau de la colonie qu'au niveau de la population. Une analyse détaillée à l'aide de marqueurs microsatellites nous révèle que les deux types de colonies ont des systèmes d'accouplements similaires avec peu ou pas de renouvellement de reines. L'absence totale de différenciation génétique entre les colonies à une et à plusieurs reines n'apporte aucun support à l'hypothèse selon laquelle un changement dans le nombre de reines conduit à un flux de gènes restreint entre les deux formes sociales. A côté de changements dans la composition génétique de la colonie, la variation du nombre de reines dans une colonie est associée à une multitude de changements comportementaux et de traits d'histoire de vie qui ont été décrits comme formant un "syndrome polygyne". Dans le chapitre 2, nous démontrons que les colonies à plusieurs reines diffèrent profondément des colonies à une reine en terme de taille, densité de nids, longévité des colonies, poids des nouvelles reines produites ainsi que dans l'allocation entre les individus reproducteurs et les ouvrières. Ces changements multiples dans les traits d'histoire de vie peuvent apporter des bénéfices variés en terme de fitness aux colonies à plusieurs reines. L'augmentation du nombre de reines dans une colonie est généralement associée à une baisse du degré d'agressivité envers les fourmis étrangères au nid. L'hypothèse "phénotype matching" prédit que les colonies à plusieurs reines ont une plus grande diversité dans les facteurs d'origine génétique utilisés pour la reconnaissance, résultant en une capacité diminuée à discriminer une fourmi étrangère au nid. Contrairement à cette hypothèse, nous montrons dans le chapitre 3 que les colonies à une et à plusieurs reines ont des niveaux d'agressivité similaires. De plus, une agressivité accrue est observée entre colonies de structures sociales différentes comparée à des colonies de même structure sociale. Plusieurs hypothèses ont proposé que l'évolution de colonies ä plusieurs reines soit en partie due aux bénéfices résultant d'une augmentation de la diversité génétique dans la colonie. L'hypothèse "task efficiency" prédit que la diversité génétique améliore l'efficacité à effectuer certaines tâches grâce à une expression plus complète et plus souple d'une division du travail génétiquement déterminée. Nous évaluons dans le chapitre 4 si un accroissement de la diversité génétique augmente le polymorphisme de taille des ouvrières, d'où peut ainsi découler une meilleure division du travail. Nous montrons qu'en dépit du fait que la taille des ouvrières soit un caractère héritable, une forte diversité génétique ne se traduit pas par un plus fort polymorphisme chez les ouvrières. Les ouvrières de colonies à plusieurs reines sont plus petites et moins polymorphes que celles des colonies à une seule reine. Dans le chapitre 5, nous démontrons l'existence d'un conflit ouvert entre reines et ouvrières à propos de l'allocation dans les sexes, comme le prédit la théorie de la sélection de parentèle. Nos données révèlent que les reines de F. selysi influencent fortement l'allocation dans les sexes en biaisant la sexe ratio des oeufs. Cependant, certains indices indiquent que les ouvrières éliminent une partie du couvain mâle, ce qui a pour effet d'avoir un investissement dans les sexes au niveau de la population intermédiaire entre les intérêts des reines et des ouvrières.