Benefit Provision- Ch 5

[a.begdai]

Section 4.8 Last line before the Question says "Redistribution would occur if contributions were subject to a ceiling but benefits are not."

In my opinion, redistribution should occur if the benefits are subject to ceiling and not contributions because this way the benefit paid is capped for all (including high contribution payers).

So I am unable the draw the correct interpretation for the statement because if contribution is restricted and benefits are unlimited, by no means it indicates redistribution of wealth as even the rich has access to high benefit payout.

Will appreciate if someone could help me to develop a better understanding.

 

[mulita]

I would assume that without ceiling or thresholds, benefits received will be proportional (or in correspondence with) to contributions made. all things equal. So whenever benefits are not proportional to the contributions, there is redistribution. This could be achieved by having ceiling on either contributions or benefits.

So if there is a ceiling on contributions, the provider e.g. state can choose to give more benefits to a specified set of beneficiaries than to others. This is redistribution. In terms of a ceiling on benefits, the section has already explained.

 

[a.begdai]

I would assume that without ceiling or thresholds, benefits received will be proportional (or in correspondence with) to contributions made. all things equal. So whenever benefits are not proportional to the contributions, there is redistribution. This could be achieved by having ceiling on either contributions or benefits.

So if there is a ceiling on contributions, the provider e.g. state can choose to give more benefits to a specified set of beneficiaries than to others. This is redistribution. In terms of a ceiling on benefits, the section has already explained.

Thank you mulita, makes sense now.