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Political complements in the welfare state: Health care and social security

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  • Bethencourt, Carlos
  • Galasso, Vincenzo

Abstract

All OECD countries target a large majority of their welfare spending to the elderly, through public pensions and health care programs. Spending in both programs has largely increased in the past decades -- often more than the share of elderly in the population. We suggest that these phenomena may be due to political complementarities between these two transfer programs. We show that these two programs may coexist, because public health care may increase the political constituency in favor of social security, and vice-versa. Specifically, public health decreases the absolute longevity differential between low and high-income individuals, therefore rising the retirement period and the total pension benefits of the former relatively to the latter. This effect increases the political support for social security among the low-income young. We show that in a political equilibrium of a two-dimensional majoritarian election, a voting majority of low-income young and retirees supports a large welfare state; the composition between public health and social security is determined by intermediate (median) income types, who favor the contemporaneous existence of these two programs, since public health increases their longevity enough to make social security more attractive. Technological improvements in health care strengthens this complementarity and lead to more welfare spending.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 92 (2008)
Issue (Month): 3-4 (April)
Pages: 609-632

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Handle: RePEc:eee:pubeco:v:92:y:2008:i:3-4:p:609-632

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Web page: http://www.elsevier.com/locate/inca/505578

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References

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Citations

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Cited by:
  1. Ryo Arawatari & Tetsuo Ono, 2009. "The Political Economy of Social Security and Public Goods Provision in a Borrowing-constrained Economy," Discussion Papers in Economics and Business 09-38, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
  2. Yusuke Kinai, 2011. "Design of a Social Security System: Pension System vs. Unemployment Insurance," Discussion Papers in Economics and Business 11-12, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
  3. Bossi, Luca & Gumus, Gulcin, 2011. "Income Inequality, Mobility, and the Welfare State: A Political Economy Model," IZA Discussion Papers 5909, Institute for the Study of Labor (IZA).
  4. Potrafke, Niklas, 2012. "Is German domestic social policy politically controversial?," Munich Reprints in Economics 19274, University of Munich, Department of Economics.
  5. Tetsuo Ono, 2013. "Public Education and Social Security: A Political Economy Approach," Discussion Papers in Economics and Business 13-06-Rev, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
  6. Ryo Arawatari & Tetsuo Ono, 2011. "Old-age Social Security vs. Forward Intergenerational Public Goods Provision," Discussion Papers in Economics and Business 11-26-Rev, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP), revised Apr 2012.
  7. Shuyun May Li & Solmaz Moslehi & Siew Ling Yew, 2012. "Public-Private Mix of Health Expenditure: A Political Economy Approach and A Quantitative Exercise," Development Research Unit Working Paper Series 11-12, Monash University, Department of Economics.
  8. Tetsuo Ono, 2014. "Economic Growth and the Politics of Intergenerational Redistribution," Discussion Papers in Economics and Business 14-17, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
  9. Tetsuo Ono, 2013. "Public Education and Social Security: A Political Economy Approach," Discussion Papers in Economics and Business 13-06, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
  10. Tetsuo Ono, 2013. "Inequality Dynamics and the Politics of Redistribution," Discussion Papers in Economics and Business 12-09-Rev, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
  11. Meliyanni Johar & Glenn Jones & Michael Keane & Elizabeth Savage & Olena Stavrunova, 2010. "The demand for private health insurance: do waiting lists or waiting times matter? CHERE Working Paper 2010/8," Working Papers 2010/8, CHERE, University of Technology, Sydney.
  12. Tetsuo Ono, 2011. "Marital Status and Derived Pension Rights: A Political Economy Model of Public Pensions with Borrowing Constraints," Discussion Papers in Economics and Business 11-32-Rev, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP), revised May 2012.
  13. Ryo Arawatari & Tetsuo Ono, 2011. "Old-age Social Security vs. Forward Intergenerational Public Goods Provision," Discussion Papers in Economics and Business 11-26-Rev.2, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP), revised Aug 2013.
  14. Bethencourt, Carlos & Kunze, Lars, 2013. "The political economics of redistribution, inequality and tax avoidance," MPRA Paper 51127, University Library of Munich, Germany.

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