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Renegotiation of Social Contracts by Majority Rule

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  • Anderberg, D.
  • Perroni, C.

Abstract

We consider renegotiation of social earnings insurance arrangements by majority voting in an economy where ex-ante identical individuals make unobservable private investments in education. We show that voting-based renegotiation can result in a higher expected level of investment in comparison to the case where social insurance is determined by an appointed social planner.

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File URL: http://www2.warwick.ac.uk/fac/soc/economics/research/workingpapers/2008/twerp566.pdf
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Bibliographic Info

Paper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 566.

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Length: 28 pages
Date of creation: 2000
Date of revision:
Handle: RePEc:wrk:warwec:566

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Keywords: INSURANCE ; EDUCATION ; INCOME ; VOTING;

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References

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  1. Robin Boadway & Nicolas Marceau & Maurice Marchand, 1992. "Investment in Education and the Time Inconsistency of Redistributive Tax Policy," Working Papers 860, Queen's University, Department of Economics.
  2. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June.
  3. Poutvaara, Panu, 2003. "Investment in Education and Redistributive Taxation without Precommitment," Munich Reprints in Economics 19299, University of Munich, Department of Economics.
  4. Andersson, Fredrik & Konrad, Kai A., 2001. "Globalization and Human Capital Formation," IZA Discussion Papers 245, Institute for the Study of Labor (IZA).
  5. Hans-Werner Sinn, 1996. "Social insurance, incentives and risk taking," International Tax and Public Finance, Springer, vol. 3(3), pages 259-280, July.
  6. Robin W. Boadway & Michael Keen, 1993. "Evasion and Time Consistency in the Taxation of Capital Income," Working Papers 890, Queen's University, Department of Economics.
  7. Sanford J Grossman & Oliver D Hart, 2001. "An Analysis of the Principal-Agent Problem," Levine's Working Paper Archive 391749000000000339, David K. Levine.
  8. Dewatripont, M. & Maskin, E., 1990. "Contract renegotiation in models of asymmetric information," European Economic Review, Elsevier, vol. 34(2-3), pages 311-321, May.
  9. Grossman, Sanford J & Stiglitz, Joseph E, 1980. "On the Impossibility of Informationally Efficient Markets," American Economic Review, American Economic Association, vol. 70(3), pages 393-408, June.
  10. Fudenberg, Drew & Tirole, Jean, 1990. "Moral Hazard and Renegotiation in Agency Contracts," Econometrica, Econometric Society, vol. 58(6), pages 1279-1319, November.
  11. Stiglitz, Joseph E, 1977. "Monopoly, Non-linear Pricing and Imperfect Information: The Insurance Market," Review of Economic Studies, Wiley Blackwell, vol. 44(3), pages 407-30, October.
  12. Konrad, Kai A, 1999. "Privacy, Time Consistent Optimal Labour Income Taxation and Education Policy," CEPR Discussion Papers 2326, C.E.P.R. Discussion Papers.
  13. Akerlof, George A, 1980. "A Theory of Social Custom, of Which Unemployment May be One Consequence," The Quarterly Journal of Economics, MIT Press, vol. 94(4), pages 749-75, June.
  14. Pearce, David & Stacchetti, Ennio, 1997. "Time Consistent Taxation by a Government with Redistributive Goals," Journal of Economic Theory, Elsevier, vol. 72(2), pages 282-305, February.
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