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The birth and growth of the social-insurance state : explaining old-age and medical insurance across countries

  • David M. Cutler
  • Richard Johnson

We seek to explain why countries have adopted national Old-Age Insurance and Health Insurance programs. Theoretical work has posited several factors that could lead to this adoption: the strain from expanding capitalism; the need for political legitimacy; the desire to transfer to similar people; increased wealth; and the outcome of leviathan government. We relate the probability of a country’s creating social insurance to proxies for each of these theories. We find weak evidence that the probability of adopting a system declines with increases in wealth and with greater ethnic heterogeneity. Still, none of the theories is very strongly related to system adoption. We conclude that social insurance can be politically expedient for many different reasons.

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Paper provided by Federal Reserve Bank of Kansas City in its series Research Working Paper with number RWP 01-13.

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Date of creation: 2001
Date of revision:
Handle: RePEc:fip:fedkrw:rwp01-13
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  1. Easterly, William & Levine, Ross, 1997. "Africa's Growth Tragedy: Policies and Ethnic Divisions," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1203-50, November.
  2. Roubini, Nouriel & Sachs, Jeffrey D., 1989. "Political and economic determinants of budget deficits in the industrial democracies," European Economic Review, Elsevier, vol. 33(5), pages 903-933, May.
  3. Alesina, Alberto & Tabellini, Guido, 1990. "A Positive Theory of Fiscal Deficits and Government Debt," Review of Economic Studies, Wiley Blackwell, vol. 57(3), pages 403-14, July.
  4. Cukierman, A. & Tommasi, M., 1997. "When Does It Take a Nixon to Go to China," Papers 30-97, Tel Aviv.
  5. Naohiro Yashiro & Takashi Oshio, 1999. "Social Security and Retirement in Japan," NBER Chapters, in: Social Security and Retirement around the World, pages 239-267 National Bureau of Economic Research, Inc.
  6. Jeffrey A. Miron & David N. Weil, 1997. "The Genesis and Evolution of Social Security," NBER Working Papers 5949, National Bureau of Economic Research, Inc.
  7. Willem Adema & Marcel Einerhand & Bengt Eklind & Jorgen Lotz & Mark Pearson, 1996. "Net Public Social Expenditure," OECD Labour Market and Social Policy Occasional Papers 19, OECD Publishing.
  8. Alesina, Alberto & Baqir, Reza & Easterly, William, 1999. "Public goods and ethnic divisions," Policy Research Working Paper Series 2108, The World Bank.
  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 373-88, September.
  10. Sam Peltzman, 1980. "The Growth of Government," University of Chicago - George G. Stigler Center for Study of Economy and State 1, Chicago - Center for Study of Economy and State.
  11. Nouriel Roubini & Jeffrey Sachs, 1988. "Political and Economic Determinants of Budget Deficits in the IndustrialDemocracies," NBER Working Papers 2682, National Bureau of Economic Research, Inc.
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