Voiting on social security reform with heterogeneous agents
AbstractThis paper analyzes the quantitative role of idiosyncratic uncertainty in an economy in which rational agents vote on hypothetical social security reforms. We construct an Overlapping Generations economy in which individuals face idiosuncratic risk with respect to their labor productivity and the labor-leisure decision is endogenous. We find that role of a pay-as-you-go social security system as a partial insurance device significantly reduces political support for a transition to an economy with a fully funded system. Also, smoother transitions have less political support than more rapid transitions. We conclude that the status quo bias in favor of an unfunded social security system is stronger in economies in which agents of similar age differ significantly with respect to labor earnings and wealth due to idiosyncratic uncertainty.
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Bibliographic InfoPaper provided by Universitat de Barcelona. Espai de Recerca en Economia in its series Working Papers in Economics with number 36.
Length: 0 pages
Date of creation: 1998
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Postal: Espai de Recerca en Economia, Facultat de CiÃ¨ncies EconÃ²miques. Tinent Coronel Valenzuela, Num 1-11 08034 Barcelona. Spain.
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Find related papers by JEL classification:
- D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
- D91 - Microeconomics - - Intertemporal Choice - - - Intertemporal Household Choice; Life Cycle Models and Saving
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
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- Attanasio Orazio P. & Kitao Sagiri & Violante Giovanni L., 2006. "Quantifying the Effects of the Demographic Transition in Developing Economies," The B.E. Journal of Macroeconomics, De Gruyter, De Gruyter, vol. 6(1), pages 1-44, April.
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