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The Redistributive Design of Social Security Systems

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  • J. Ignacio Conde-Ruiz
  • Paola Profeta

Abstract

Countries with low intragenerational redistribution in social security systems (Bismarckian) are associated with larger public pension expenditures, a smaller fraction of private pension and lower income inequality than countries with more redistributive social security (Beveridgean). This article introduces a bidimensional voting model to account for these features. Agents different in age, income and in their ability to invest in the capital market vote on the degree of redistribution of the social security system and on the size of the transfer. In an economy with three income groups, a small Beveridgean system is supported by low-income agents, who gain from its redistributive feature, and high-income individuals, who seek to minimise their tax contribution and to invest in a private scheme. Middle-income individuals instead favour a large Bismarckian system. Copyright 2007 The Author(s). Journal compilation Royal Economic Society 2007.

Suggested Citation

  • J. Ignacio Conde-Ruiz & Paola Profeta, 2007. "The Redistributive Design of Social Security Systems," Economic Journal, Royal Economic Society, vol. 117(520), pages 686-712, April.
  • Handle: RePEc:ecj:econjl:v:117:y:2007:i:520:p:686-712
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