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Social security and family support

  • LEROUX, Marie-Louise


    (Département des Sciences Economiques, UQAM, Montréal, Canada)

  • PESTIEAU, Pierre


    (University of Liège, CREPP, B-4000 Liège, Belgium: Université catholique de Louvain, CORE, B-1348 Louvain-la-Neuve, Belgium; PSE, Paris, France and CEPR)

This paper shows how the role of the market, the state and the family in providing financial support at old age has evolved over time with changes in factors such as the reliability and the effectiveness of family support, the rate of interest, the cost of public funds and earning inequality. We model a society in which agents with different productivity are asked to vote over the existence of a Beveridgian pension system. We show that when children assistance is certain and large, agents may rely exclusively on family to finance old-age consumption and prefer to vote for a zero tax rate. Only if income inequalities are very large, a majority will be in favor of a pension system. However, when the size and the likelihood of family generosity decreases, a pension system is more likely to emerge. In that case, agents supplement children assistance with pension benefits. A pension system is also more likely to emerge when the cost of public fund is small and the return from private savings is high.

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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 2011045.

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Date of creation: 01 Oct 2011
Date of revision:
Handle: RePEc:cor:louvco:2011045
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  1. Sinn, Hans-Werner, 2004. "The pay-as-you-go pension system as fertility insurance and an enforcement device," Journal of Public Economics, Elsevier, vol. 88(7-8), pages 1335-1357, July.
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  4. CASAMATTA, Georges & CREMER, Helmuth & PESTIEAU, Pierre, 1999. "The political economy of social security," CORE Discussion Papers 1999055, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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  14. Chakrabarti, Subir & Lord, William & Rangazas, Peter, 1993. "Uncertain Altruism and Investment in Children," American Economic Review, American Economic Association, vol. 83(4), pages 994-1002, September.
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  16. Pascal Belan & Bertrand Wigniolle, 2007. "Political economy of social security with endogenous preferences," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00185268, HAL.
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