Gerontocracy, Retirement, and Social Security

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Gerontocracy, Retirement, and Social Security

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Casey B. Mulligan
Xavier Sala-i-Martin ()

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Abstract

Why are the old politically successful? We build a simple interest group model in which political pressure is time-intensive, showing that in the political competitive equilibrium each group lobbies for government policies that lower their own value of time but the old do so to a greater extent and as a result are net gainers from the political process. What distinguishes the elderly from other political groups (and what makes them more succesful) is that they have lower labor productivity and/or that we are all likely to become elderly at some point, while we are relatively unlikely to change gender, race, sexual orientation, or even ocupation, The model has a variety of implications for the design of social security programs, which we test using data from the Social Security Administration. For example, the model predicts that social security programs with retirement incentives are larger and that the old are more "single-minded" in their politics, implications which we verify using cross-country government finance data and cross- country political participation surveys. Finally, we show that the forced savings programs intended to "reform" the social security system may increase the amount of intergenerational redistribution. As a model for evaluating policy reforms, ours has the attractive feature that reforms must be time time consistent from a political point of view rather than a public interest point of view.

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Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 383.

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Date of creation: Apr 1999
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Handle: RePEc:upf:upfgen:383

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Paper
- Casey B. Mulligan & Xavier Sala-i-Martin, 1999. "Gerontocracy, Retirement, and Social Security," NBER Working Papers 7117, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
- Casey B Mulligan, 1999. "Gerontocracy, Retirement, and Social Security," University of Chicago - George G. Stigler Center for Study of Economy and State 154, Chicago - Center for Study of Economy and State. [Downloadable!]

Find related papers by JEL classification:
H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
J2 - Labor and Demographic Economics - - Demand and Supply of Labor
J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

This paper has been announced in the following NEP Reports:

NEP-ALL-1999-07-28 (All new papers)
NEP-CDM-1999-07-28 (Collective Decision-Making)
NEP-LAB-1999-07-28 (Labour Economics)
NEP-MIC-1999-07-28 (Microeconomics)
NEP-PUB-1999-07-28 (Public Finance)

References listed on IDEAS
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