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Social Security, Retirement, and the Single-Mindedness of the Electorate

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

We propose a positive theory that is consistent with two important features of social security programs around the world: (1) they redistribute income from young to old and (2) they induce retirement. We construct a voting model that includes a political campaign' or debate' prior to the election. The model incorporates single-mindedness' of the groups that do not work: while the workers divide their political capital between their age concerns' and occupational concerns', the retired concentrate all their political capital to support their age group. In our model, the elderly end up getting transfers from the government (paid by the young) and distortionary labor income taxes induce the retirement of the elderly. In addition, our model predicts that occupational groups that work more will tend to have more political power. The opposite is true for non-occupational groups (such as the elderly). We provide some evidence that supports these additional predictions.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9691.

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Date of creation: May 2003
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Handle: RePEc:nbr:nberwo:9691
Note: AG PE
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  14. Casey B. Mulligan & Xavier Sala-i-Martin, 1999. "Social security in theory and practice (I): Facts and political theories," Economics Working Papers 384, Department of Economics and Business, Universitat Pompeu Fabra.
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  19. John Rust & Christopher Phelan, 1997. "How Social Security and Medicare Affect Retirement Behavior in a World of Incomplete Markets," Econometrica, Econometric Society, vol. 65(4), pages 781-832, July.
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