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Pensions and Voting Equilibria in an Overlapping Generation Model with Heterogeneous Agents

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Author Info
Mahieu, GŽraldine (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) ; Belgian National Fund for Scientific Research (FNRS))
Rottier, StŽphane (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))
Abstract

We model how a Beveridgean pay-as-you-go pension system may be supported by a majority of heterogeneous voters in a general equilibrium OLG model. The introduction of heterogeneity creates intragenerational transfers among workers which may lead to different optimal taxation rates within young individuals and to a positive taxation rate as outcome of the political choice. We underline the general equilibrium effects of a PAYG pension system on the interest rate, on future wages and therefore on the future level of pensions. We obtain an equilibrium tax rate and pension level that do not depend on population growth rate and on the capital stock.

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Publisher Info
Paper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) with number 1999031.

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Length: 22
Date of creation: 01 Nov 1998
Date of revision: 00 Nov 1999
Handle: RePEc:ctl:louvir:1999031

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Related research
Keywords: Social Security; Majority Voting;

Find related papers by JEL classification:
D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior
E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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References listed on IDEAS
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  1. Azariadis, Costas & Galasso, Vincenzo, 2002. "Fiscal Constitutions," Journal of Economic Theory, Elsevier, vol. 103(2), pages 255-281, April. [Downloadable!] (restricted)
  2. Roberts, Kevin W. S., 1977. "Voting over income tax schedules," Journal of Public Economics, Elsevier, vol. 8(3), pages 329-340, December. [Downloadable!] (restricted)
  3. 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)
  4. De Donder, P. & Hindriks, J., 1999. "Voting over Social Security with Uncertain Lifetimes," Discussion Papers 99/21, University of Exeter, School of Business and Economics.
  5. Casamatta, Georges & Cremer, Helmuth & Pestieau, Pierre, 2000. " The Political Economy of Social Security," Scandinavian Journal of Economics, Blackwell Publishing, vol. 102(3), pages 503-22, June. [Downloadable!] (restricted)
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  6. Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-27, October. [Downloadable!] (restricted)
  7. Boadway, Robin W & Wildasin, David E, 1989. "A Median Voter Model of Social Security," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(2), pages 307-28, May. [Downloadable!] (restricted)
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  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. Juan C. Conesa & Dirk Krueger, 1999. "Social Security Reform with Heterogeneous Agents," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(4), pages 757-795, October. [Downloadable!] (restricted)
  10. Tabellini, Guido, 1991. "The Politics of Intergenerational Redistribution," Journal of Political Economy, University of Chicago Press, vol. 99(2), pages 335-57, April. [Downloadable!] (restricted)
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  11. Esteban Joan Maria & Sakovics Jozsef, 1993. "Intertemporal Transfer Institutions," Journal of Economic Theory, Elsevier, vol. 61(2), pages 189-205, December. [Downloadable!] (restricted)
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  12. Browning, Edgar K, 1975. "Why the Social Insurance Budget Is Too Large in a Democracy," Economic Inquiry, Oxford University Press, vol. 13(3), pages 373-88, September.
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