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Social security and family support

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Author Info

  • LEROUX, Marie-Louise

    ()
    (Département des Sciences Economiques, UQAM, Montréal, Canada)

  • PESTIEAU, Pierre

    ()
    (University of Liège, CREPP, B-4000 Liège, Belgium: Université catholique de Louvain, CORE, B-1348 Louvain-la-Neuve, Belgium; PSE, Paris, France and CEPR)

Abstract

This paper shows how the role of the market, the state and the family in providing financial support at old age has evolved over time with changes in factors such as the reliability and the effectiveness of family support, the rate of interest, the cost of public funds and earning inequality. We model a society in which agents with different productivity are asked to vote over the existence of a Beveridgian pension system. We show that when children assistance is certain and large, agents may rely exclusively on family to finance old-age consumption and prefer to vote for a zero tax rate. Only if income inequalities are very large, a majority will be in favor of a pension system. However, when the size and the likelihood of family generosity decreases, a pension system is more likely to emerge. In that case, agents supplement children assistance with pension benefits. A pension system is also more likely to emerge when the cost of public fund is small and the return from private savings is high.

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Bibliographic Info

Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2011045.

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Date of creation: 01 Oct 2011
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Handle: RePEc:cor:louvco:2011045

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Keywords: social security; old-age security; family solidarity;

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References

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  1. Billari, Francesco C. & Galasso, Vincenzo, 2008. "What Explains Fertility? Evidence from Italian Pension Reforms," CEPR Discussion Papers 7014, C.E.P.R. Discussion Papers.
  2. Zhang, Junsen & Nishimura, Kazuo, 1993. "The old-age security hypothesis revisited," Journal of Development Economics, Elsevier, vol. 41(1), pages 191-202, June.
  3. Sinn, Hans-Werner, 2004. "The pay-as-you-go pension system as fertility insurance and an enforcement device," Munich Reprints in Economics 938, University of Munich, Department of Economics.
  4. Casamatta, Georges & Cremer, Helmuth & Pestieau, Pierre, 2000. " The Political Economy of Social Security," Scandinavian Journal of Economics, Wiley Blackwell, vol. 102(3), pages 503-22, June.
  5. LEROUX, Marie-Louise & PESTIEAU, Pierre & RACIONERO, Maria, . "Voting on pensions: sex and marriage," CORE Discussion Papers RP -2308, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. Rainald Borck, 2003. "On the Choice of Public Pensions when Income and Life Expectancy Are Correlated," Discussion Papers of DIW Berlin 369, DIW Berlin, German Institute for Economic Research.
  7. Browning, Edgar K, 1975. "Why the Social Insurance Budget Is Too Large in a Democracy," Economic Inquiry, Western Economic Association International, vol. 13(3), pages 373-88, September.
  8. Marie-Louise Leroux, 2010. "The Political Economy of Social Security under Differential Longevity and Voluntary Retirement," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 12(1), pages 151-170, 02.
  9. repec:hal:cesptp:halshs-00185268 is not listed on IDEAS
  10. Guido Tabellini, 1990. "A Positive Theory of Social Security," NBER Working Papers 3272, National Bureau of Economic Research, Inc.
  11. Casamatta, Georges & Cremer, Helmuth & Pestieau, Pierre, 2000. "Political sustainability and the design of social insurance," Journal of Public Economics, Elsevier, vol. 75(3), pages 341-364, March.
  12. De Donder, P. & Hindriks, J., 1999. "Voting over Social Security with Uncertain Lifetimes," Discussion Papers 9921, Exeter University, Department of Economics.
  13. Becker, Gary S & Barro, Robert J, 1988. "A Reformulation of the Economic Theory of Fertility," The Quarterly Journal of Economics, MIT Press, vol. 103(1), pages 1-25, February.
  14. Michele Boldrin & Aldo Rustichini, 2000. "Political Equilibria with Social Security," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(1), pages 41-78, January.
  15. Cigno, Alessandro & Rosati, Furio Camillo, 1992. "The Effects of Financial Markets and Social Security on Saving and Fertility Behaviour in Italy," Journal of Population Economics, Springer, vol. 5(4), pages 319-41.
  16. Chakrabarti, Subir & Lord, William & Rangazas, Peter, 1993. "Uncertain Altruism and Investment in Children," American Economic Review, American Economic Association, vol. 83(4), pages 994-1002, September.
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Cited by:
  1. Cremer, Helmuth & Gahvari, Firouz & Pestieau, Pierre, 2013. "Endogenous altruism, redistribution, and long term care," IDEI Working Papers 768, Institut d'Économie Industrielle (IDEI), Toulouse.
  2. CREMER, Helmuth & gahvari, Firouz & PESTIEAU, Pierre, 2013. "Uncertain altruism and the provision of long term care," CORE Discussion Papers 2013047, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Mikko Puhakka & Matti Viren, 2012. "Social Security, Saving and Fertility," Finnish Economic Papers, Finnish Economic Association, vol. 25(1), pages 28-42, Spring.

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