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Aging, Inequality and Social Security

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Author Info
Ryo Arawatari () (Graduate School of Economics, Osaka University)
Tetsuo Ono () (Graduate School of Economics, Osaka University)

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Abstract

This paper develops an overlapping-generations model including wage inequality within a generation and intra- and intergenerational resource reallocation via social security. Based on the concept of a stationary Markov perfect equilibrium, the paper focuses on the feedback mechanism between current individualsf decisions on saving and future voting on social security. The paper demonstrates the determination of social security via probabilistic voting and its consequence for consumption inequality within a generation. It is shown that when the elderly are politically powerful, (i) the economy attains an oscillatory path of inequality and social security, and (ii) aging may reduce consumption inequality.

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File URL: http://www2.econ.osaka-u.ac.jp/library/global/dp/0819.pdf
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Publisher Info
Paper provided by Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP) in its series Discussion Papers in Economics and Business with number 08-19.

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Length: 36 pages
Date of creation: Apr 2008
Date of revision:
Handle: RePEc:osk:wpaper:0819

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Web page: http://www.econ.osaka-u.ac.jp/
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Related research
Keywords: Aging Inequality Social security Political Economy Stationary Markov Perfect Equilibrium

Other versions of this item:

Find related papers by JEL classification:
D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior
H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
J10 - Labor and Demographic Economics - - Demographic Economics - - - General

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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. Casamatta, Georges & Cremer, Helmuth & Pestieau, Pierre, 2000. "The Political Economy of Social Security," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
    Other versions:
  3. Hassler, John & Krusell, Per & Storesletten, Kjetil & Zilibotti, Fabrizio, 2005. "The dynamics of government," Journal of Monetary Economics, Elsevier, vol. 52(7), pages 1331-1358, October. [Downloadable!] (restricted)
  4. Deaton, Angus & Paxson, Christina, 1994. "Intertemporal Choice and Inequality," Journal of Political Economy, University of Chicago Press, vol. 102(3), pages 437-67, June. [Downloadable!] (restricted)
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  5. Galasso, Vincenzo & Profeta, Paola, 2007. "How does ageing affect the welfare state?," European Journal of Political Economy, Elsevier, vol. 23(2), pages 554-563, June. [Downloadable!] (restricted)
  6. Marko Köthenbürger & Panu Poutvaara & Paola Profeta, 2005. "Why are More Redistributive Social Security Systems Smaller? A Median Voter Approach," IZA Discussion Papers 1831, Institute for the Study of Labor (IZA). [Downloadable!]
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  7. John Hassler & José V. Rodríguez Mora & Kjetil Storesletten & Fabrizio Zilibotti, 2001. "The Survival of the Welfare State," Economics Working Papers 603, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
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  8. Lorenzo Forni, 2005. "Social Security as Markov Equilibrium in OLG Models," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 8(1), pages 178-194, January. [Downloadable!] (restricted)
  9. Marco Bassetto, 2008. "Political Economy of Taxation in an Overlapping-Generations Economy," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(1), pages 18-43, January. [Downloadable!] (restricted)
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  10. J. Ignacio Conde-Ruiz & Paola Profeta, 2007. "The Redistributive Design of Social Security Systems," Working Papers 2007-07, FEDEA. [Downloadable!]
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  11. Phillip Swagel & Efraim Sadka & Assaf Razin, 2002. "The Aging of the Population and the Size of the Welfare State," IMF Working Papers 02/68, International Monetary Fund. [Downloadable!]
  12. Vincenzo Galasso & Paola Profeta, 2004. "Lessons For An Aging Society: The Political Sustainability Of Social Security Systems," Working Papers, Center for Retirement Research at Boston College 2004-07, Center for Retirement Research. [Downloadable!]
    Other versions:
  13. Bellettini, Giorgio & Berti Ceroni, Carlotta, 2007. "Income distribution, borrowing constraints and redistributive policies," European Economic Review, Elsevier, vol. 51(3), pages 625-645, April. [Downloadable!] (restricted)
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  14. Ohtake, Fumio & Saito, Makoto, 1998. "Population Aging and Consumption Inequality in Japan," Review of Income and Wealth, Blackwell Publishing, vol. 44(3), pages 361-81, September.
  15. Gonzalez-Eiras, Marti­n & Niepelt, Dirk, 2008. "The future of social security," Journal of Monetary Economics, Elsevier, vol. 55(2), pages 197-218, March. [Downloadable!] (restricted)
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  16. Grossman, Gene M & Helpman, Elhanan, 1998. "Intergenerational Redistribution with Short-Lived Governments," Economic Journal, Royal Economic Society, vol. 108(450), pages 1299-1329, September. [Downloadable!] (restricted)
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  17. 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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  18. Georges Casamatta & Helmuth Cremer & Pierre Pestieau, 2001. "Demographic Shock and Social Security: A Political Economy Perspective," International Tax and Public Finance, Springer, vol. 8(4), pages 417-431, August. [Downloadable!] (restricted)
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