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The political intergenerational welfare state

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  • Bishnu, Monisankar
  • Wang, Min

Abstract

This paper characterizes an intergenerational welfare state with endogenous education and pension choice under general equilibrium-probabilistic voting. We show that politically implementing public education program always increases the future human capital, but this higher future human capital would not help support a more generous social security in the future. The effect of implementing PAYG social security on education however crucially depends on the sources of funding for education investment. Establishing PAYG pension program depresses investment in public education. However if the source of funding for education investment is private, in both the cases when pension is the only instrument or when public pension and public education are implemented together as a package, there can be an improvement in education investment if and only if the political influence of the old is limited and so the size of the PAYG social security is small. A substantially thick pension scheme which results from a heavy influence of the old in the political process spoils the mutual benefits.

Suggested Citation

  • Bishnu, Monisankar & Wang, Min, 2014. "The political intergenerational welfare state," ISU General Staff Papers 201408010700001024, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genstf:201408010700001024
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    Cited by:

    1. Ono, Tetsuo & Uchida, Yuki, 2016. "Pensions, education, and growth: A positive analysis," Journal of Macroeconomics, Elsevier, vol. 48(C), pages 127-143.
    2. Uchida, Yuki & Ono, Tetsuo, 2021. "Generational conflict and education politics: Implications for growth and welfare," Journal of Macroeconomics, Elsevier, vol. 69(C).
    3. Uchida, Yuki & Ono, Tetsuo, 2021. "Political economy of taxation, debt ceilings, and growth," European Journal of Political Economy, Elsevier, vol. 68(C).
    4. Uchida, Yuki & Ono, Tetsuo, 2022. "Politics of Public Education and Pension Reform with Endogenous Fertility," MPRA Paper 112748, University Library of Munich, Germany.
    5. Andersen, Torben M. & Bhattacharya, Joydeep & Gestsson, Marias H., 2021. "Pareto-improving transition to fully funded pensions under myopia," Journal of Demographic Economics, Cambridge University Press, vol. 87(2), pages 169-212, June.
    6. Uchida, Yuki & Ono, Tetsuo, 2021. "Borrowing to finance public investment: a politico-economic analysis of fiscal rules," MPRA Paper 115844, University Library of Munich, Germany, revised 31 Dec 2022.
    7. Torben Andersen & Joydeep Bhattacharya, 2020. "Intergenerational Debt Dynamics Without Tears," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 35, pages 192-219, January.
    8. Bishnu, Monisankar & Garg, Shresth & Garg, Tishara & Ray, Tridip, 2023. "Intergenerational transfers: Public education and pensions with endogenous fertility," Journal of Economic Dynamics and Control, Elsevier, vol. 153(C).
    9. Hu, Weizhen, 2019. "Policy effects on transitional welfare in an overlapping generations model: A pay-as-you-go pension reconsidered," Economic Modelling, Elsevier, vol. 81(C), pages 40-48.
    10. Yuki Uchida & Tetsuo Ono, 2024. "Generational Distribution of Fiscal Burdens: A Positive Analysis," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 65(1), pages 393-430, February.
    11. Bishnu, Monisankar & Garg, Shresth & Garg, Tishara & Ray, Tridip, 2021. "Optimal intergenerational transfers: Public education and pensions," Journal of Public Economics, Elsevier, vol. 198(C).
    12. Amol Amol & Monisankar Bishnu & Tridip Ray, 2023. "Pension, possible phaseout, and endogenous fertility in general equilibrium," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 25(2), pages 376-406, April.
    13. Uchida, Yuki & Ono, Tetsuo, 2024. "Life expectancy and politics of public education and pension with endogenous fertility," Journal of Economic Dynamics and Control, Elsevier, vol. 168(C).
    14. Monisankar Bishnu & Cagri Kumru, 2020. "A Note on the Annuity Role of Estate Tax - ONLINE SUPPLEMENT," ANU Working Papers in Economics and Econometrics 2020-676, Australian National University, College of Business and Economics, School of Economics.
    15. Andersen, Torben M. & Bhattacharya, Joydeep & Liu, Qing, 2020. "Reference-dependent preferences, time inconsistency, and unfunded pensions," ISU General Staff Papers 202004170700001102, Iowa State University, Department of Economics.
    16. Ono, Tetsuo & Uchida, Yuki, 2018. "Capital Income Taxation, Economic Growth, and the Politics of Public Education," MPRA Paper 86523, University Library of Munich, Germany.
    17. Daniel Montolio & Amedeo Piolatto & Luca Salvadori, 2022. "Financing public education when agents have retirement concerns," Economic Inquiry, Western Economic Association International, vol. 60(4), pages 1559-1580, October.
    18. Lopez-Velasco, Armando R., 2024. "Markov equilibrium of social security: An analytic solution under CRRA utility and the future of social security," Economic Modelling, Elsevier, vol. 132(C).

    More about this item

    JEL classification:

    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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