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What Social Security: Beveridgean or Bismarckian?

  • J. Ignacio Conde-Ruiz
  • Paola Profeta

Bismarckian social security systems are associated with larger public pension expenditures, a smaller fraction of private pension and lower income inequality than Beveridgean systems. This paper introduces a bidimensional voting model to account for all these features. Agents differ in age, income and in their ability to invest in the capital market. The voting game determines the degree of redistribution of the social security system -Bismarckian or Beveridgean- and the size of the transfer (for the low-income retirees). 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 minimize their tax contribution and to invest their resources in a private scheme. Middle- income individuals favor a large earning-related (Bismarckian) system. Hence, large (small) inequality is associated with a small Beveridgean (large Bismarckian) system and a large (small) private system.

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Paper provided by FEDEA in its series Working Papers with number 2003-16.

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Handle: RePEc:fda:fdaddt:2003-16
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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. J. Ignacio Conde-Ruiz & Vincenzo Galasso, . "The Macroeconomics of Early Retirement," Working Papers 2003-05, FEDEA.
  3. Michael J. Boskin & Laurence J. Kotlikoff & Douglas J. Puffert & John B. Shoven, 1987. "Social Security: A Financial Appraisal Across and Within Generations," NBER Working Papers 1891, National Bureau of Economic Research, Inc.
  4. CASAMATTA, Georges & CREMER, Helmuth & PESTIEAU, Pierre, . "Political sustainability and the design of social insurance," CORE Discussion Papers RP -1449, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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  6. 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).
  7. Epple, Dennis & Romano, Richard E., 1996. "Ends against the middle: Determining public service provision when there are private alternatives," Journal of Public Economics, Elsevier, vol. 62(3), pages 297-325, November.
  8. Guido Tabellini, 1990. "A Positive Theory of Social Security," NBER Working Papers 3272, National Bureau of Economic Research, Inc.
  9. Conde-Ruiz, J.I. & Galasso, V., 2000. "Early Retirement," Economics Working Papers eco2000/24, European University Institute.
  10. J. Ignacio Conde-Ruiz & Vincenzo Galasso, . "Early retirement," Working Papers 2003-03, FEDEA.
  11. J. Ignacio Conde-Ruiz & Vincenzo Galasso, . "The Macroeconomic of Early Retirement," Working Papers 194, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  12. Franco Peracchi, 2002. "The European Community Household Panel: A review," Empirical Economics, Springer, vol. 27(1), pages 63-90.
  13. Tito Boeri & Axel Boersch-Supan & Guido Tabellini, 2002. "Pension Reforms and the Opinions of European Citizens," American Economic Review, American Economic Association, vol. 92(2), pages 396-401, May.
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