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Why Are More Redistributive Social Security Systems Smaller? A Median Voter Approach

  • Koethenbuerger, Marko

    ()

    (CESifo)

  • Poutvaara, Panu

    ()

    (University of Munich)

  • Profeta, Paola

    ()

    (Bocconi University)

We suggest a political economy explanation for the stylized fact that intragenerationally more redistributive social security systems are smaller. We relate the stylized fact to an "efficiency-redistribution" trade-off to be resolved by political process. The inefficiency of social security financing is due to endogenous labor supply. Using data on eight European countries, we find that the stylized fact and a considerable degree of cross-country variation in contribution rates can be explained by the median voter model.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1831.

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Length: 18 pages
Date of creation: Nov 2005
Date of revision:
Publication status: published in: Oxford Economic Papers, 2008, 60 (2), 275-292
Handle: RePEc:iza:izadps:dp1831
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  28. Svend E. Hougaard Jensen & Morten I. Lau & Panu Poutvaara, 2004. "Efficiency and Equity Aspects of Alternative Social Security Rules," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 60(3), pages 325-, September.
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