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Voting On Social Security When Labor Supply Is Endogenous†

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  • Friedrich Breyer

Abstract

One of the puzzles in the political economic theory of unfunded pension systems is that middle‐aged voters do not seem to advocate unlimited increases in the level of contributions and benefits if they take this decision to be valid forever. While the previous literature answered this question by pointing at borrowing restrictions, a more convincing explanation rests on the voters’understanding that future social security taxes will adversely affect future labor supply and thus the source from which their own pensions must be financed. This paper analyzes the validity of this explanation for two different types of pension systems, (a) the lump‐sum benefits case, and (b) the case of fairness within cohorts.

Suggested Citation

  • Friedrich Breyer, 1994. "Voting On Social Security When Labor Supply Is Endogenous†," Economics and Politics, Wiley Blackwell, vol. 6(2), pages 119-130, July.
    • Handle: RePEc:bla:ecopol:v:6:y:1994:i:2:p:119-130
    DOI: 10.1111/j.1468-0343.1994.tb00091.x
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    References listed on IDEAS

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    1. Wildasin, David E, 1991. "The Marginal Cost of Public Funds with an Aging Population," Journal of Population Economics, Springer;European Society for Population Economics, vol. 4(2), pages 111-135, May.
    2. Breyer, Friedrich & von der Schulenburg, J-Matthias Graf, 1990. "Family Ties and Social Security in a Democracy," Public Choice, Springer, vol. 67(2), pages 155-167, November.
    3. Verbon, Harrie A A, 1986. "Altruism, Political Power and Public Pensions," Kyklos, Wiley Blackwell, vol. 39(3), pages 343-358.
    4. Boadway, Robin W & Wildasin, David E, 1989. "A Median Voter Model of Social Security," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(2), pages 307-328, May.
    5. Browning, Edgar K, 1975. "Why the Social Insurance Budget Is Too Large in a Democracy," Economic Inquiry, Western Economic Association International, vol. 13(3), pages 373-388, September.
    6. Harrie A. A. Verbon, 1986. "Altruism, Political Power and Public Pensions," Kyklos, Wiley Blackwell, vol. 39(3), pages 343-358, August.
    7. Breyer, Friedrich & Graf v d Schulenburg, J-Matthias, 1987. "Voting on Social Security: The Family as Decision-Making Unit," Kyklos, Wiley Blackwell, vol. 40(4), pages 529-547.
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    Cited by:

    1. Grégory De Walque, 2005. "Voting on Pensions: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 19(2), pages 181-209, April.
    2. Juan Lacomba & Francisco Lagos, 2010. "Postponing the legal retirement age," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 1(3), pages 357-369, July.
    3. Kai A. Konrad & Gert Wagner, 2000. "Reform of the Public Pension System in Germany," Discussion Papers of DIW Berlin 200, DIW Berlin, German Institute for Economic Research.
    4. repec:kap:iaecre:v:12:y:2006:i:4:p:530-539 is not listed on IDEAS
    5. Kemmerling, Achim & Neugart, Michael, 2009. "Financial market lobbies and pension reform," European Journal of Political Economy, Elsevier, vol. 25(2), pages 163-173, June.
    6. Juan Lacomba & Francisco Lagos, 2006. "Reinforcing the Link Between Contributions and Pensions: The Effect of the Population Aging," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 12(4), pages 530-539, November.
    7. Galasso, Vincenzo & Profeta, Paola, 2002. "The political economy of social security: a survey," European Journal of Political Economy, Elsevier, vol. 18(1), pages 1-29, March.
    8. Georges Casamatta & L. Batté, 2016. "The Political Economy of Population Aging," Post-Print hal-02520521, HAL.
    9. Casamatta, G. & Batté, L., 2016. "The Political Economy of Population Aging," Handbook of the Economics of Population Aging, in: Piggott, John & Woodland, Alan (ed.), Handbook of the Economics of Population Aging, edition 1, volume 1, chapter 0, pages 381-444, Elsevier.
    10. Di Liddo, Giuseppe, 2018. "Immigration and PAYG pension systems in the presence of increasing life expectancy," Economics Letters, Elsevier, vol. 162(C), pages 56-61.

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