Optimal tax tax rates are lowered, revenue will be decrease by the same amount—and an economic effect—which provides incentives for individuals to increase their work output through low tax rates. These correspond to the mechanical and behavioural effects discussed by Saez. The Laffer Curve illustrates that, for sufficiently high tax levels, the (negative) behavioural effect will outweigh the (positive) mechanical effect of a tax increase, and so increasing tax rates will reduce tax revenue. In fact, tax revenue with a tax rate of 100% is likely to be 0, since there is no remaining incentive to work at all. Therefore, the tax
Notional Defined Contributions Notional Defined Contributions The term Notional Defined Contributions or Non-financial Defined Contributions or NDC refers to type of public pension system in which contributions made by the public behave in similar way they would in most public funds. This system is implemented in several countries in Europe such as Latvia, Poland, Italy and Sweden. NDC is in many ways similar to classical PAYG pension scheme. Working age individuals contribute to the system and pay for the benefits of current retirees. However, NDCs are different when it comes to determining the size of the benefits. For each individual the amount contributed