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The political economy of social security

  • CASAMATTA, Georges

    (CREPP, Université de Liège and GREMAQ, Université de Toulouse)

  • CREMER, Helmuth

    (GREMAQ and IDEI, Université de Toulouse and Insitut universitaire de France)

  • PESTIEAU, Pierre

    ()

    (CREPP, Université de Liège, CORE and Delta)

We consider a two-period overlapping generations model in which individual voters differ not only according to age but also productivity. In such a setting, a (redistributive) Pay-As-You-Go system is politically sustainable, even when the interest rate is larger than the rate of population growth. The medium wages workers (not the lowest) join the retirees to form a majority and vote for a positive level of social security. This level depends on the difference between population growth and interest rate and on the redistributiveness of the benefit rule.

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File URL: http://alfresco.uclouvain.be/alfresco/download/attach/workspace/SpacesStore/5e040668-8be4-4622-b686-74dfb0fcb5f3/coredp_1999_55.pdf
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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 1999055.

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Date of creation: 01 Sep 1999
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Handle: RePEc:cor:louvco:1999055
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  1. Conde-Ruiz, Jose Ignacio & Galasso, Vincenzo, 2005. "Positive arithmetic of the welfare state," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 933-955, June.
  2. Guido Tabellini, 1990. "A Positive Theory of Social Security," NBER Working Papers 3272, National Bureau of Economic Research, Inc.
  3. CASAMATTA, Georges & CREMER , Helmuth & PESTIEAU, Pierre, . "The political economy of social security," CORE Discussion Papers RP 1475, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Philippe De Donder & Jean Hindriks, 1998. "The political economy of targeting," Public Choice, Springer, vol. 95(1), pages 177-200, April.
  5. 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 307-28, May.
  6. Casamatta, Georges & Cremer, Helmuth & Pestieau, Pierre, 2000. "Political sustainability and the design of social insurance," Journal of Public Economics, Elsevier, vol. 75(3), pages 341-364, March.
  7. Myles,Gareth D., 1995. "Public Economics," Cambridge Books, Cambridge University Press, number 9780521497695.
  8. Hu, Sheng Cheng, 1982. "Social Security, Majority-Voting Equilibrium and Dynamic Efficiency," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 23(2), pages 269-87, June.
  9. Veall, Michael R., 1986. "Public pensions as optimal social contracts," Journal of Public Economics, Elsevier, vol. 31(2), pages 237-251, November.
  10. 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 373-88, September.
  11. Epple, Dennis & Romano, Richard E, 1996. "Public Provision of Private Goods," Journal of Political Economy, University of Chicago Press, vol. 104(1), pages 57-84, February.
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