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On the Choice of Public Pensions when Income and Life Expectancy Are Correlated

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Author Info
Rainald Borck

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Abstract

The paper presents a model where public pensions are determined by majority voting. Voters differ by age and income. Moreover, life expectancy increases with income. Depending on the strength of the link between contributions and benefits, and the relationship between income and life expectancy, individually optimal tax rates may increase or decrease with income. If they decrease, high tax rates are supported by pensioners and poor workers. If they increase with income, the coalition for high tax rates consists of pensioners and rich workers. `Ends against the middle' equilibria are also possible.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.40777.de/dp369.pdf
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Publisher Info
Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 369.

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Length: 17 p.
Date of creation: 2003
Date of revision:
Publication status: Published in: Journal of Public Economic Theory 9 (2007), 4, 711-725
Handle: RePEc:diw:diwwpp:dp369

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Related research
Keywords: Voting; public pensions; life expectancy;

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

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References listed on IDEAS
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. J. Ignacio Conde & Paola Profeta, 2002. "What Social Security: Beveridgean or Bismarckian?," Economics Working Papers 633, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
    Other versions:
  2. Casamatta, Georges & Cremer, Helmuth & Pestieau, Pierre, 2000. "The Political Economy of Social Security," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  3. Julia Lynn Coronado & Don Fullerton & Thomas Glass, 2000. "The Progressivity of Social Security," NBER Working Papers 7520, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Bethencourt Marrero, Carlos & Galasso, Vincenzo, 2001. "On the Political Complementarity Between Health Care and Social Security," CEPR Discussion Papers 2788, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  5. Orazio P. Attanasio & Carl Emmerson, 2001. "Differential Mortality in the UK," NBER Working Papers 8241, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  6. 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)
    Other versions:
  7. Guillem López & Joan Gil, 1997. "Life-time Redistribution Effects of the Spanish Public Pension System," Economics Working Papers 242, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
  8. Epple, Dennis & Romano, Richard E., 1996. "Ends against the middle: Determining public service provision when there are private alternatives," Journal of Public Economics, Elsevier, vol. 62(3), pages 297-325, November. [Downloadable!] (restricted)
  9. Lindert, Peter H., 1996. "What Limits Social Spending?," Explorations in Economic History, Elsevier, vol. 33(1), pages 1-34, January. [Downloadable!] (restricted)
  10. 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.
  11. Assaf Razin & Efraim Sadka & Phillip Swagel, 2002. "The Aging Population and the Size of the Welfare State," Journal of Political Economy, University of Chicago Press, vol. 110(4), pages 900-918, August. [Downloadable!] (restricted)
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  12. Galasso, Vincenzo & Profeta, Paola, 2002. "The political economy of social security: a survey," European Journal of Political Economy, Elsevier, vol. 18(1), pages 1-29, March. [Downloadable!] (restricted)
  13. Tabellini, Guido, 2000. " A Positive Theory of Social Security," Scandinavian Journal of Economics, Blackwell Publishing, vol. 102(3), pages 523-45, June. [Downloadable!] (restricted)
    Other versions:
Full references

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. Tim Krieger & Stefan Traub, 2008. "Back to Bismarck? Shifting Preferences for Intragenerational Redistribution in OECD Pension Systems," Working Papers 13, University of Paderborn, CIE Center for International Economics. [Downloadable!]
  2. Michael Gorski & Tim Krieger & Thomas Lange, 2007. "Pensions, Education and Life Expectancy," Working Papers 4, University of Paderborn, CIE Center for International Economics. [Downloadable!]
  3. Rainald Borck, 2005. "Voting, Inequality, and Redistribution," Discussion Papers of DIW Berlin 503, DIW Berlin, German Institute for Economic Research. [Downloadable!]
    Other versions:
  4. Christophe Hachon, 2008. "Who Really Benefits from Pension Systems?," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00279651_v1, HAL. [Downloadable!]
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