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On the Political Economy of Social Security and Public Education

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  • Poutvaara, Panu

    (University of Munich)

Abstract

This paper analyzes simultaneous voting on the wage tax rate and investment in public education with three overlapping generations and productivity differences inside each cohort. Wage tax revenue finances public education and social security benefits. The presence of productivity differences introduces a time-consistency problem with repeated voting. This can be solved by trigger strategies which do not punish upward deviations in the wage tax rate. If there are multiple equilibria, then higher tax rates are associated with more education. Surprisingly, the median voter may be a young citizen even when cohorts are of the same size.

Suggested Citation

  • Poutvaara, Panu, 2004. "On the Political Economy of Social Security and Public Education," IZA Discussion Papers 1408, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp1408
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    More about this item

    Keywords

    social security; public education; voting;
    All these keywords.

    JEL classification:

    • 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
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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