Bismarckian social security systems are associated with larger public pension expenditures, a smaller fraction of private pension and lower income inequality than Beveridgean systems. This paper introduces a bidimensional voting model to account for all these features. Agents differ in age, income and their ability to invest in capital market. The voting game determines the degree of redistribution of the social security system - Bismarckian or Beveridgean- and the size of the transfer. In an economy with three income groups, a small Beveridgean system is supported by low-income agents, who gain from its redistributive feature, and high-income individuals, who seek to minimize their tax contribution and invest their resources in a private scheme. Middle-income individuals instead favor a large earning-related system. Hence, large (small) inequality is associated with a small Beveridgean (large Bismarckian) system and a large (small) private system
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Paper provided by Society for Economic Dynamics in its series 2004 Meeting Papers with number
317.
Length: Date of creation: 2004 Date of revision: Handle: RePEc:red:sed004:317
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Find related papers by JEL classification: H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs 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
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.:
J. Ignacio Conde-Ruiz & Vincenzo Galasso, 2003.
"Early Retirement,"
Review of Economic Dynamics,
Elsevier for the Society for Economic Dynamics, vol. 6(1), pages 12-36, January.
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