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Retirement and Social Security in a Probabilistic Voting Model

  • Paola Profeta

    ()

Why are social security transfers associated with retirement rules? This paper focuses on the political interactions between retirement and social security. Using a probabilistic voting approach, it analyzes why old people are induced to retire in order to receive pension transfers from the young. A crucial hypothesis is that leisure in old age represents a “merit good,” which is positively valued by all agents in the society, young and old. Thus, the politicians choose to tax the labor income of the old, to induce them to retire. Retirement increases the level of ideological homogeneity of the old. In fact, once retired, the elderly are more “single-minded,” since they only care about redistributive issues, such as pensions. This increase in their political power allows them to win the political game and to receive a positive transfer from the young (social security). Copyright Kluwer Academic Publishers 2002

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File URL: http://hdl.handle.net/10.1023/A:1016539016693
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Article provided by Springer in its journal International Tax and Public Finance.

Volume (Year): 9 (2002)
Issue (Month): 4 (August)
Pages: 331-348

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Handle: RePEc:kap:itaxpf:v:9:y:2002:i:4:p:331-348
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  1. 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.
  2. Coughlin, Peter & Nitzan, Shmuel, 1981. "Electoral outcomes with probabilistic voting and Nash social welfare maxima," Journal of Public Economics, Elsevier, vol. 15(1), pages 113-121, February.
  3. Lindert, Peter H., 1996. "What Limits Social Spending?," Explorations in Economic History, Elsevier, vol. 33(1), pages 1-34, January.
  4. Hinich, Melvin J. & Ledyard, John O. & Ordeshook, Peter C., 1972. "Nonvoting and the existence of equilibrium under majority rule," Journal of Economic Theory, Elsevier, vol. 4(2), pages 144-153, April.
  5. Torsten Persson & Gerard Roland & Guido Tabellini, . "Towards Micropolitical Foundations of Public Finance," Working Papers 119, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  6. Jonathan Gruber & David A. Wise, 1999. "Social Security and Retirement around the World," NBER Books, National Bureau of Economic Research, Inc, number grub99-1, May.
  7. Assar Lindbeck & Jörgen Weibull, 1987. "Balanced-budget redistribution as the outcome of political competition," Public Choice, Springer, vol. 52(3), pages 273-297, January.
  8. 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.
  9. Brennan, Geoffrey & Walsh, Cliff, 1977. "Pareto-Desirable Redistribution in Kind: An Impossibility Theorem," American Economic Review, American Economic Association, vol. 67(5), pages 987-90, December.
  10. Paola Profeta, 2002. "Aging and Retirement: Evidence Across Countries," International Tax and Public Finance, Springer, vol. 9(6), pages 651-672, November.
  11. Coughlin, Peter & Nitzan, Shmuel, 1981. "Directional and local electoral equilibria with probabilistic voting," Journal of Economic Theory, Elsevier, vol. 24(2), pages 226-239, April.
  12. Casey Mulligan & Tomas Philipson, . "Merit Motives and Government Intervention: Public Finance in Reverse," University of Chicago - Population Research Center 2000-03, Chicago - Population Research Center.
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