Electoral competition and the unfunding of public pension programs
AbstractMost public pension systems failed to build pension funds, even when it was clear that the benefits the systems were paying could not be sustained in the long run. I argue in this paper that politicians ruling public pension programs have strong incentives to exhaust the pension funds, offering generous pensions to old voters to raise the probability of winning the elections. Young voters do not support those electoral proposals to spend the pension fund, since a reduction of the fund will pull pensions down when they retire. The pension fund does not survive if old voters prevail, something that is likely to happen in the model in this paper despite of old voters being less than young voters. Electoral competition favors the elderly because they tend to be more willing to change their vote for a good pension than are young voters to change their vote for a larger pension fund.
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Bibliographic InfoPaper provided by Department of Economics - dECON in its series Documentos de Trabajo (working papers) with number 0101.
Length: 19 pages
Date of creation: Mar 2001
Date of revision:
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Electoral competition; Pensions; Probabilistic voting.;
Find related papers by JEL classification:
- E69 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Other
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
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- Alvaro Forteza, 2003. "Seguridad social y competencia política," Documentos de Trabajo (working papers) 0403, Department of Economics - dECON.
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