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Aging and the Welfare State: The Role of Young and Old Voting Pivots

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  • Assaf Razin
  • Efraim Sadka

Abstract

An income tax is generally levied on both capital and labor income. The working young bears mostly the burden of the tax on labor income, whereas the retired old, who already acummulated her savings, bears the brunt of the capital income tax. Therefore, there arise two types of conflict in the determination of the income tax: the standard intragenerational conflict between the poor and the rich, and an ntergenerational conflict between the young and the old. The paper studies how aging affects the resolution of these conflicts, and the politico-economic forces that are at play: the changes in the voting pivots and the fiscal leakage from tax payers to transfer recipients.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10967.

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Date of creation: Dec 2004
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Handle: RePEc:nbr:nberwo:10967

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  1. 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, University of Chicago Press, vol. 110(4), pages 900-918, August.
  2. Becker, Gary S, 1983. "A Theory of Competition among Pressure Groups for Political Influence," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 98(3), pages 371-400, August.
  3. Alesina, Alberto F & Rodrik, Dani, 1991. "Distributive Politics and Economic Growth," CEPR Discussion Papers, C.E.P.R. Discussion Papers 565, C.E.P.R. Discussion Papers.
  4. Alexander Ludwig & Joachim Winter, 2003. "Aging, pension reform, and capital flows: A multi-country simulation model," MEA discussion paper series, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy 03028, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
  5. repec:fth:coluec:625 is not listed on IDEAS
  6. Alberto Alesina & Roberto Perotti, 1993. "Income Distribution, Political Instability, and Investment," NBER Working Papers 4486, National Bureau of Economic Research, Inc.
  7. Torsten Persson & Guido Tabellini, 2002. "Political Economics: Explaining Economic Policy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262661314, December.
  8. Tosun, Mehmet Serkan, 2003. "Population aging and economic growth: political economy and open economy effects," Economics Letters, Elsevier, Elsevier, vol. 81(3), pages 291-296, December.
  9. Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 89(5), pages 914-27, October.
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Cited by:
  1. Tosun, Mehmet Serkan, 2008. "Endogenous fiscal policy and capital market transmissions in the presence of demographic shocks," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 32(6), pages 2031-2060, June.

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