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On the Political Complementarity Between Health Care and Social Security

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  • Bethencourt Marrero, Carlos
  • Galasso, Vincenzo

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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Keywords: Endogenous Longevity; Subgame Perfect Structure Induced Equilibrium;

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References

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Cited by:
  1. 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.
  2. Gilles LE GARREC, 2009. "Système de retraite et vieillissement," Annales d'Economie et de Statistique, ENSAE, issue 93-94, pages 363-379.
  3. 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.

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