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On the Choice of Public Pensions when Income and Life Expectancy Are Correlated

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  • RAINALD BORCK

Abstract

The paper presents a model where public pensions are determined by majority voting. Voters differ by age and income. Moreover, life expectancy increases with income. Depending on the strength of the link between contributions and benefits, and the relationship between income and life expectancy, individually optimal tax rates may increase or decrease with income. If they decrease, high tax rates are supported by pensioners and poor workers. If they increase with income, the coalition for high tax rates consists of pensioners and rich workers. "Ends against the middle" equilibria are also possible. Copyright 2007 Blackwell Publishing, Inc..

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Bibliographic Info

Article provided by Association for Public Economic Theory in its journal Journal of Public Economic Theory.

Volume (Year): 9 (2007)
Issue (Month): 4 (08)
Pages: 711-725

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Handle: RePEc:bla:jpbect:v:9:y:2007:i:4:p:711-725

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  1. Casamatta, Georges & Cremer, Helmuth & Pestieau, Pierre, 2000. " The Political Economy of Social Security," Scandinavian Journal of Economics, Wiley Blackwell, Wiley Blackwell, vol. 102(3), pages 503-22, June.
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  13. Guillem López & Joan Gil, 1997. "Life-time redistribution effects of the Spanish public pension system," Economics Working Papers, Department of Economics and Business, Universitat Pompeu Fabra 242, Department of Economics and Business, Universitat Pompeu Fabra.
  14. CASAMATTA, Georges & CREMER, Helmuth & PESTIEAU, Pierre, 1998. "On the political sustainability of redistributive social insurance systems," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 1998038, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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