A Model of the Link between the Fiscal System and Singapore's Central Provident Fund in General Equilibrium

• Main Authors: HOON, Hian Teck, TEO, Kai Lin
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 1992
• Subjects: Central Provident Fund; Singapore; pension fund; Asian Studies; Economics; Finance
• Online Access: https://ink.library.smu.edu.sg/soe_research/223; https://ink.library.smu.edu.sg/context/soe_research/article/1222/viewcontent/FiscalnCPF2.pdf
• Institution: Singapore Management University

This paper demonstrates a channel through which the fiscal system interacts with the choice of CPF contribution rates to affect total savings, and hence, capital accumulation and the current account. It is shown that in the presence of a wage income tax, raising either the employee's or employer's contribution rates raises the total private earnings. On the other hand, in the presence of a capital income tax, raising the employee's or employer's contribution rates lowers total private savings. However, when we introduce a productive role for government spending, we show that an increase in CPF contribution rates under a balances budget policy may, in fact, lower total savings.