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Pensions and Voting Equilibria in an Overlapping Generation Model with Heterogeneous Agents

Author

Listed:
  • Mahieu, Géraldine

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) ; Belgian National Fund for Scientific Research (FNRS))

  • Rottier, Stéphane

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))

Abstract

We model how a Beveridgean pay-as-you-go pension system may be supported by a majority of heterogeneous voters in a general equilibrium OLG model. The introduction of heterogeneity creates intragenerational transfers among workers which may lead to different optimal taxation rates within young individuals and to a positive taxation rate as outcome of the political choice. We underline the general equilibrium effects of a PAYG pension system on the interest rate, on future wages and therefore on the future level of pensions. We obtain an equilibrium tax rate and pension level that do not depend on population growth rate and on the capital stock.

Suggested Citation

  • Mahieu, Géraldine & Rottier, Stéphane, 1998. "Pensions and Voting Equilibria in an Overlapping Generation Model with Heterogeneous Agents," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1999031, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES), revised 00 Nov 1999.
  • Handle: RePEc:ctl:louvir:1999031
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    File URL: http://sites.uclouvain.be/econ/DP/IRES/9931.pdf
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    References listed on IDEAS

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    1. Tabellini, Guido, 2000. " A Positive Theory of Social Security," Scandinavian Journal of Economics, Wiley Blackwell, vol. 102(3), pages 523-545, June.
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    3. Casamatta, Georges & Cremer, Helmuth & Pestieau, Pierre, 2000. " The Political Economy of Social Security," Scandinavian Journal of Economics, Wiley Blackwell, vol. 102(3), pages 503-522, June.
    4. Azariadis, Costas & Galasso, Vincenzo, 2002. "Fiscal Constitutions," Journal of Economic Theory, Elsevier, vol. 103(2), pages 255-281, April.
    5. Thomas F. Cooley & Jorge Soares, 1999. "A Positive Theory of Social Security Based on Reputation," Journal of Political Economy, University of Chicago Press, vol. 107(1), pages 135-160, February.
    6. 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 307-328, May.
    7. De Donder, P. & Hindriks, J., 1999. "Voting over Social Security with Uncertain Lifetimes," Discussion Papers 9921, Exeter University, Department of Economics.
    8. Esteban Joan Maria & Sakovics Jozsef, 1993. "Intertemporal Transfer Institutions," Journal of Economic Theory, Elsevier, vol. 61(2), pages 189-205, December.
    9. 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 373-388, September.
    10. Roberts, Kevin W. S., 1977. "Voting over income tax schedules," Journal of Public Economics, Elsevier, vol. 8(3), pages 329-340, December.
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    12. Juan C. Conesa & Dirk Krueger, 1999. "Social Security Reform with Heterogeneous Agents," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(4), pages 757-795, October.
    13. BOLDRIN, Michele & RUSTICHINI, Aldo, 1994. "Equilibria with Social Security," CORE Discussion Papers 1994060, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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    Cited by:

    1. Grégory de Walque, 2005. "Voting on Pensions: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 19(2), pages 181-209, April.
    2. repec:rnp:ecopol:ep1805 is not listed on IDEAS

    More about this item

    Keywords

    Social Security; Majority Voting;

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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