Political Equilibria with Social Security
AbstractWe model PAYG social security systems as the outcome of majority voting within a OLG model with production. When voting, individuals make two choices: pay the elderly their pensions or default. which amount to promise themselves next period. Under general circumstances, there exist equilibria where pensions are voted into existence and maintained. Our analysis uncovers two reason for this. The traditional one relies on intergenerational trade and occurs at inefficient equilibria. A second reason relies on the monopoly power of the median voter. It occurs when a reduction in current savings induces a large enough increase in future return on capital to compensate for the negative effect of the tax. We characterize the steady state and dynamic properties of these equilibria and study their welfare properties. (Copyright: Elsevier)
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Bibliographic InfoArticle provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.
Volume (Year): 3 (2000)
Issue (Month): 1 (January)
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Find related papers by JEL classification:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
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