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Aging, Inequality and Social Security

  • Ryo Arawatari

    ()

    (Graduate School of Economics, Osaka University)

  • Tetsuo Ono

    ()

    (Graduate School of Economics, Osaka University)

This paper develops an overlapping-generations model including wage inequality within a generation and intra- and intergenerational resource reallocation via social security. Based on the concept of a stationary Markov perfect equilibrium, the paper focuses on the feedback mechanism between current individualsf decisions on saving and future voting on social security. The paper demonstrates the determination of social security via probabilistic voting and its consequence for consumption inequality within a generation. It is shown that when the elderly are politically powerful, (i) the economy attains an oscillatory path of inequality and social security, and (ii) aging may reduce consumption inequality.

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File URL: http://www2.econ.osaka-u.ac.jp/library/global/dp/0819.pdf
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Paper provided by Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP) in its series Discussion Papers in Economics and Business with number 08-19.

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Length: 36 pages
Date of creation: Apr 2008
Date of revision:
Handle: RePEc:osk:wpaper:0819
Contact details of provider: Web page: http://www.econ.osaka-u.ac.jp/Email:


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  1. Gene M. Grossman & Elhanan Helpman, 1996. "Intergenerational Redistribution with Short-Lived Governments," NBER Working Papers 5447, National Bureau of Economic Research, Inc.
  2. Assaf Razin & Efraim Sadka & Phillip Swagel, 2002. "The Aging Population and the Size of the Welfare State," Journal of Political Economy, University of Chicago Press, vol. 110(4), pages 900-918, August.
  3. Zheng Song, 2011. "The Dynamics of Inequality and Social Security in General Equilibrium," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 14(4), pages 613-635, October.
  4. J. Ignacio Conde-Ruiz & Paola Profeta, 2007. "The Redistributive Design of Social Security Systems," Economic Journal, Royal Economic Society, vol. 117(520), pages 686-712, 04.
  5. Phillip Swagel & Efraim Sadka & Assaf Razin, 2002. "The Aging of the Population and the Size of the Welfare State," IMF Working Papers 02/68, International Monetary Fund.
  6. Vincenzo Galasso & Paola Profeta, 2004. "Lessons for an Aging Society: The Political Sustainability of Social Security Systems," Working Papers, Center for Retirement Research at Boston College wp2004-7, Center for Retirement Research.
  7. Bellettini, Giorgio & Berti Ceroni, Carlotta, 2007. "Income distribution, borrowing constraints and redistributive policies," European Economic Review, Elsevier, vol. 51(3), pages 625-645, April.
  8. Martin Gonzalez-Eiras & Dirk Niepelt, 2007. "The Future of Social Security," Working Papers 07.02, Swiss National Bank, Study Center Gerzensee.
  9. Angus Deaton & Christina Paxson, 1993. "Intertemporal Choice and Inequality," NBER Working Papers 4328, National Bureau of Economic Research, Inc.
  10. John Hassler & José V. Rodríguez Mora & Kjetil Storesletten & Fabrizio Zilibotti, 2001. "The survival of the welfare state," Economics Working Papers 603, Department of Economics and Business, Universitat Pompeu Fabra.
  11. CASAMATTA, Georges & CREMER , Helmuth & PESTIEAU, Pierre, . "The political economy of social security," CORE Discussion Papers RP -1475, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  12. Azariadis, Costas & Galasso, Vincenzo, 2002. "Fiscal Constitutions," Journal of Economic Theory, Elsevier, vol. 103(2), pages 255-281, April.
  13. Assar Lindbeck & Jörgen Weibull, 1987. "Balanced-budget redistribution as the outcome of political competition," Public Choice, Springer, vol. 52(3), pages 273-297, January.
  14. Hassler, John & Krusell, Per & Storesletten, Kjetil & Zilibotti, Fabrizio, 2005. "The dynamics of government," Journal of Monetary Economics, Elsevier, vol. 52(7), pages 1331-1358, October.
  15. Georges Casamatta & Helmuth Cremer & Pierre Pestieau, 2001. "Demographic Shock and Social Security: A Political Economy Perspective," International Tax and Public Finance, Springer, vol. 8(4), pages 417-431, August.
  16. Marko Koethenbuerger & Panu Poutvaara & Paola Profeta, 2008. "Why are more redistributive social security systems smaller? A median voter approach," Oxford Economic Papers, Oxford University Press, vol. 60(2), pages 275-292, April.
  17. Marco Bassetto, 2008. "Political Economy of Taxation in an Overlapping-Generations Economy," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(1), pages 18-43, January.
  18. Lorenzo Forni, 2005. "Social Security as Markov Equilibrium in OLG Models," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 8(1), pages 178-194, January.
  19. Ohtake, Fumio & Saito, Makoto, 1998. "Population Aging and Consumption Inequality in Japan," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 44(3), pages 361-81, September.
  20. Galasso, Vincenzo & Profeta, Paola, 2007. "How does ageing affect the welfare state?," European Journal of Political Economy, Elsevier, vol. 23(2), pages 554-563, June.
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