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

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  • Koethenbuerger, Marko

    (CESifo)

  • Poutvaara, Panu

    (University of Munich)

  • Profeta, Paola

    (Bocconi University)

Abstract

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.

Suggested Citation

  • Koethenbuerger, Marko & Poutvaara, Panu & Profeta, Paola, 2005. "Why Are More Redistributive Social Security Systems Smaller? A Median Voter Approach," IZA Discussion Papers 1831, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp1831
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    More about this item

    Keywords

    public pensions; applied political economy; earnings-related and flat-rate benefits; labor supply;
    All these keywords.

    JEL classification:

    • 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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