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Design of a Social Security System: Pension System vs. Unemployment Insurance

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  • Yusuke Kinai

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    (Graduate School of Economics, Osaka University)

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    Abstract

    This paper presents consideration of how the social security system evolves as the attributes of voters change. In our setting, policy determination is based on majority voting. The government has two components of social security policy: a pension system and unemployment insurance. When workers constitute most voters, the pension system is supported and when unemployed people are the majority, unemployment insurance is adopted. Under this setting, employing the concept of structure-induced equilibrium developed by Shepsle (1979), the present paper describes how the contents of the social security system evolve depending on the dynamics of capital accumulation and the unemployment rate, and demonstrates the possibility that one or the other social security system ceases to exist in certain instances.

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    File URL: http://www2.econ.osaka-u.ac.jp/library/global/dp/1112.pdf
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    Bibliographic 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 11-12.

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    Length: 26 pages
    Date of creation: Mar 2011
    Date of revision:
    Handle: RePEc:osk:wpaper:1112

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    Web page: http://www.econ.osaka-u.ac.jp/
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    Related research

    Keywords: Social Security; Pension System vs. Unemployment Insurance; Majority Voting; Structureinduced equilibrium.;

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    1. 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.
    2. Poutvaara, Panu, 2006. "On the political economy of social security and public education," Munich Reprints in Economics 19551, University of Munich, Department of Economics.
    3. Leo Kaas & Leopold Thadden, 2004. "Budgetary policy and unemployment dynamics in an olg model with collective bargaining," Economic Journal, Royal Economic Society, vol. 114(498), pages 867-889, October.
    4. Bräuninger, Michael, 2004. "Social Security, Unemployment, and Growth," HWWA Discussion Papers 266, Hamburg Institute of International Economics (HWWA).
    5. C Bean & Christopher A. Pissarides, 1992. "Unemployment, Consumption and Growth," CEP Discussion Papers dp0100, Centre for Economic Performance, LSE.
    6. J. Ignacio Conde-Ruiz & Paola Profeta, 2007. "The Redistributive Design of Social Security Systems," Economic Journal, Royal Economic Society, vol. 117(520), pages 686-712, 04.
    7. 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.
    8. Conde-Ruiz, José Ignacio & Galasso, Vincenzo, 1999. "Positive Arithmetic of the Welfare State," CEPR Discussion Papers 2202, C.E.P.R. Discussion Papers.
    9. Tetsuo Ono, 2007. "Unemployment dynamics in an OLG economy with public pensions," Economic Theory, Springer, vol. 33(3), pages 549-577, December.
    10. Rui Coimbra & Teresa Lloyd-Braga & Leonor Modesto, 2005. "Endogenous fluctuations in unionized economies with productive externalities," Economic Theory, Springer, vol. 26(3), pages 629-649, October.
    11. Galor, Oded & Lach, Saul, 1990. "Search Unemployment in an Overlapping-Generations Setting," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(2), pages 409-19, May.
    12. Bethencourt, Carlos & Galasso, Vincenzo, 2008. "Political complements in the welfare state: Health care and social security," Journal of Public Economics, Elsevier, vol. 92(3-4), pages 609-632, April.
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