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On the Choice of Public Pensions when Income and Life Expectancy Are Correlated

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  • RAINALD BORCK

Abstract

The paper presents a model where public pensions are determined by majority voting. Voters differ by age and income. Moreover, life expectancy increases with income. Depending on the strength of the link between contributions and benefits, and the relationship between income and life expectancy, individually optimal tax rates may increase or decrease with income. If they decrease, high tax rates are supported by pensioners and poor workers. If they increase with income, the coalition for high tax rates consists of pensioners and rich workers. "Ends against the middle" equilibria are also possible. Copyright 2007 Blackwell Publishing, Inc..

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  • Rainald Borck, 2007. "On the Choice of Public Pensions when Income and Life Expectancy Are Correlated," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 9(4), pages 711-725, August.
  • Handle: RePEc:bla:jpbect:v:9:y:2007:i:4:p:711-725
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    Cited by:

    1. Tetsuo Ono, 2016. "Marital Status and Derived Pension Rights: A Political Economy Model of Public Pensions with Borrowing Constraints," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 18(1), pages 99-124, February.
    2. Tim Krieger & Thomas Lange, 2012. "Education, Life Expectancy and Pension Reform," Hacienda Pública Española, IEF, vol. 202(3), pages 31-55, September.
    3. Marie-Louise Leroux, 2010. "The Political Economy of Social Security under Differential Longevity and Voluntary Retirement," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 12(1), pages 151-170, February.
    4. Christophe Hachon, 2010. "Éducation et progressivité des systèmes de retraite. Quand les inégalités face à la mort comptent," Revue économique, Presses de Sciences-Po, vol. 61(4), pages 751-769.
    5. Christophe Hachon, 2008. "Redistribution, Pension Systems and Capital Accumulation," Financial Theory and Practice, Institute of Public Finance, vol. 32(3), pages 339-368.
    6. M.L. Leroux & P. Pestieau, 2014. "Social Security and Family Support," Canadian Journal of Economics, Canadian Economics Association, vol. 47(1), pages 115-143, February.
    7. Yvonne Adema & Jan Bonenkamp & Lex Meijdam, 2016. "Flexible pension take-up in social security," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 23(2), pages 316-342, April.
    8. Rainald Borck, 2007. "Voting, Inequality And Redistribution," Journal of Economic Surveys, Wiley Blackwell, vol. 21(1), pages 90-109, February.
    9. Ryo Arawatari & Tetsuo Ono, 2009. "The Political Economy of Social Security and Public Goods Provision in a Borrowing-constrained Economy," Discussion Papers in Economics and Business 09-38-Rev, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP), revised Aug 2010.
    10. Stefan Traub & Tim Krieger, 2008. "Back to Bismarck? Shifting Preferences for Intragenerational Redistribution in OECD Pension Systems," LIS Working papers 485, LIS Cross-National Data Center in Luxembourg.
    11. Stefan Traub & Tim Krieger, 2008. "Back to Bismarck? Shifting Preferences for Intragenerational Redistribution in OECD Pension Systems," LIS Working papers 485, LIS Cross-National Data Center in Luxembourg.
    12. Leroux, Marie-Louise & Pestieau, Pierre & Racionero, María, 2011. "Voting on pensions: Sex and marriage," European Journal of Political Economy, Elsevier, vol. 27(2), pages 281-296, June.
    13. Christophe Hachon, 2008. "Redistribution, Pension Systems and Capital Accumulation," Working Papers halshs-00279167, HAL.
    14. Stefan Traub & Tim Krieger, 2009. "Wie hat sich die intragenerationale Umverteilung in der staatlichen Säule des Rentensystems verändert? Ein internationaler Vergleich auf Basis von LIS-Daten," LIS Working papers 520, LIS Cross-National Data Center in Luxembourg.
    15. Christophe Hachon, 2009. "Who Really Benefits from Pension Systems ? When Life Expectancy Matters," Revue d'économie politique, Dalloz, vol. 119(4), pages 613-632.
    16. András Simonovits, 2015. "Socially optimal contribution rate and cap in a proportional (DC) pension system," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 14(1), pages 45-63, December.
    17. Helmuth Cremer & Philippe Donder, 2016. "Life Expectancy Heterogeneity and the Political Support for Collective Annuities," Scandinavian Journal of Economics, Wiley Blackwell, vol. 118(3), pages 594-615, July.
    18. Ryo Arawatari & Tetsuo Ono, 2011. "Old-age Social Security vs. Forward Intergenerational Public Goods Provision," Discussion Papers in Economics and Business 11-26-Rev, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP), revised Apr 2012.
    19. Bethencourt, Carlos & Galasso, Vincenzo, 2008. "Political complements in the welfare state: Health care and social security," Journal of Public Economics, Elsevier, vol. 92(3-4), pages 609-632, April.
    20. Christophe Hachon, 2008. "Who Really Benefits from Pension Systems?," Working Papers halshs-00279651, HAL.
    21. Ryo Arawatari & Tetsuo Ono, 2014. "Old-age Social Security versus Forward Intergenerational Public Goods Provision," The Japanese Economic Review, Japanese Economic Association, vol. 65(3), pages 282-315, September.
    22. repec:eee:hapoch:v1_381 is not listed on IDEAS

    More about this item

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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