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On the Political Complementarity Between Health Care and Social Security

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Author Info
Bethencourt Marrero, Carlos
Galasso, Vincenzo

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Abstract

The dramatic rise in the US social security and public health expenditure is only partially explained by the demographic trend. We suggest that the political complementarity between these two programmes induced a multiplicative response to the ageing process. Public health care increases the political constituency in favour of social security, and vice versa. Specifically, public health decreases the 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, whose empirical relevance is confirmed by independent studies, 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 all retirees supports a large welfare state. Its composition between public health and social security is determined by intermediate (median) income types, who favour a combination of the two programs, since public health increases their longevity enough to make social security more attractive.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2788.

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Date of creation: May 2001
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Handle: RePEc:cpr:ceprdp:2788

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Related research
Keywords: Endogenous Longevity; Subgame Perfect Structure Induced Equilibrium;

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Find related papers by JEL classification:
D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior
H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

References listed on IDEAS
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  1. Epple, Dennis & Romano, Richard E, 1996. "Public Provision of Private Goods," Journal of Political Economy, University of Chicago Press, vol. 104(1), pages 57-84, February. [Downloadable!] (restricted)
  2. Casey B. Mulligan & Xavier Sala-i-Martin, 1999. "Gerontocracy, Retirement, and Social Security," NBER Working Papers 7117, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  3. Grossman, Michael, 1972. "On the Concept of Health Capital and the Demand for Health," Journal of Political Economy, University of Chicago Press, vol. 80(2), pages 223-55, March-Apr. [Downloadable!] (restricted)
  4. Angus Deaton & Christina Paxson, 1999. "Mortality, Education, Income, and Inequality among American Cohorts," NBER Working Papers 7140, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. Cutler, David M & Gruber, Jonathan, 1996. "The Effect of Medicaid Expansions on Public Insurance, Private Insurance, and Redistribution," American Economic Review, American Economic Association, vol. 86(2), pages 378-83, May. [Downloadable!] (restricted)
  6. Conde-Ruiz, José Ignacio & Galasso, Vincenzo, 1999. "Positive Arithmetic of the Welfare State," CEPR Discussion Papers 2202, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  7. Tomas J. Philipson & Gary S. Becker, 1998. "Old-Age Longevity and Mortality-Contingent Claims," Journal of Political Economy, University of Chicago Press, vol. 106(3), pages 551-573, June. [Downloadable!] (restricted)
  8. Guido Tabellini, 1990. "A Positive Theory of Social Security," NBER Working Papers 3272, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  9. Michael J. Boskin & Laurence J. Kotlikoff & Douglas J. Puffert & John B. Shoven, 1987. "Social Security: A Financial Appraisal Across and Within Generations," NBER Working Papers 1891, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  10. Anand, Sudhir & Ravallion, Martin, 1993. "Human Development in Poor Countries: On the Role of Private Incomes and Public Services," Journal of Economic Perspectives, American Economic Association, vol. 7(1), pages 133-50, Winter. [Downloadable!] (restricted)
  11. Galasso, Vincenzo, 2000. "The US Social Security: A Financial Appraisal For The Median Voter," CEPR Discussion Papers 2456, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  12. Deaton, Angus S & Paxson, Christina H, 1998. "Aging and Inequality in Income and Health," American Economic Review, American Economic Association, vol. 88(2), pages 248-53, May. [Downloadable!] (restricted)
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  13. Conde-Ruiz, J.I. & Galasso, V., 2000. "Early Retirement," Economics Working Papers eco2000/24, European University Institute.
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  14. Thomas F. Cooley & Jorge Soares, 1999. "A Positive Theory of Social Security Based on Reputation," Journal of Political Economy, University of Chicago Press, vol. 107(1), pages 135-160, February. [Downloadable!] (restricted)
  15. Angus Deaton, 1999. "Inequalities in Income and Inequalities in Health," NBER Working Papers 7141, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  16. James P. Smith, 1999. "Healthy Bodies and Thick Wallets: The Dual Relation between Health and Economic Status," Journal of Economic Perspectives, American Economic Association, vol. 13(2), pages 145-166, Spring. [Downloadable!] (restricted)
  17. David M. Cutler & Ellen Meara, 1999. "The Concentration of Medical Spending: An Update," NBER Working Papers 7279, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  18. Cutler, David M & Gruber, Jonathan, 1996. "Does Public Insurance Crowd Out Private Insurance?," The Quarterly Journal of Economics, MIT Press, vol. 111(2), pages 391-430, May. [Downloadable!] (restricted)
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  19. David M. Cutler & Ellen Meara, 1997. "The Medical Costs of The Young and Old: A Forty Year Perspective," NBER Working Papers 6114, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. William B. P. Robson, 2001. "Six Pillars of Social Policy: The State of Pensions and Health Care in Canada," The State of Economics in Canada: Festschrift in Honour of David Slater, in: Patrick Grady & Andrew Sharpe (ed.), The State of Economics in Canada: Festschrift in Honour of David Slater, pages 183-224 Centre for the Study of Living Standards. [Downloadable!]
  2. 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. [Downloadable!]
    Other versions:
  3. Gilles Le Garrec, 2005. "Systèmes de retraite et vieillissement," Documents de Travail de l'OFCE 2005-21, Observatoire Francais des Conjonctures Economiques (OFCE). [Downloadable!]
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