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Social Security in Theory and Practice (I): Facts and Political Theories

  • Casey B. Mulligan
  • Xavier Sala-i-Martin

166 countries have some kind of public old age pension. What economic forces create and sustain old age Social Security as a public program? We document some of the internationally and historically common features of Social Security programs including explicit and implicit taxes on labor supply, pay-as-you-go features, intergenerational redistribution, benefits which are increasing functions of lifetime earnings and not means-tested. We partition theories of Social Security into three groups: political', efficiency' and narrative' theories. We explore three political theories in this paper: the majority rational voting model (with its two versions: the elderly as the leaders of a winning coalition with the poor' and the once and for all election' model), the time-intensive model of political competition' and the taxpayer protection model'. Each of the explanations is compared with the international and historical facts. A companion paper explores the efficiency' and narrative' theories and derives implications of all the theories for replacing the typical pay-as-you-go system with a forced savings plan.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7118.

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Date of creation: May 1999
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Handle: RePEc:nbr:nberwo:7118
Note: AG PE
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