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On the political economy of social security and public education

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  • Poutvaara, Panu

Abstract

This paper analyzes simultaneous voting on the wage tax rate and investment in public education with three overlapping generations and ability differences inside each cohort. Wage tax revenue finances public education and social security benefits. The presence of ability differences introduces a time-consistency problem with repeated voting. This can be solved by trigger strategies, which do not punish upward deviations in the wage tax rate. If there are multiple equilibria, then higher tax rates are associated with more education. Surprisingly, the median voter may be a young citizen, even when cohorts are of the same size.

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Bibliographic Info

Paper provided by University of Munich, Department of Economics in its series Munich Reprints in Economics with number 19551.

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Date of creation: 2006
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Publication status: Published in Journal of Population Economics 2 19(2006): pp. 345-365
Handle: RePEc:lmu:muenar:19551

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