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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/
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  1. Bellettini, Giorgio & Berti Ceroni, Carlotta, 2007. "Income distribution, borrowing constraints and redistributive policies," European Economic Review, Elsevier, vol. 51(3), pages 625-645, April.
  2. Grossman, G.M. & Helpman, E., 1996. "Intergenerational Redistribution with Short-Lived Governments," Papers 178, Princeton, Woodrow Wilson School - Public and International Affairs.
  3. J. Ignacio Conde-Ruiz & Paola Profeta, 2007. "The Redistributive Design of Social Security Systems," Working Papers 2007-07, FEDEA.
  4. CASAMATTA, Georges & CREMER, Helmuth & PESTIEAU, Pierre, 1999. "The political economy of social security," CORE Discussion Papers 1999055, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. Koethenbuerger, Marko & Poutvaara, Panu & Profeta, Paola, 2008. "Why are more redistributive social security systems smaller? A median voter approach," Munich Reprints in Economics 19459, University of Munich, Department of Economics.
  6. Marco Bassetto, 1999. "Political economy of taxation in an overlapping-generations economy," Discussion Paper / Institute for Empirical Macroeconomics 133, Federal Reserve Bank of Minneapolis.
  7. Martin Gonzalez-Eiras & Dirk Niepelt, 2007. "The Future of Social Security," Working Papers 07.02, Swiss National Bank, Study Center Gerzensee.
  8. 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.
  9. John Hassler & José V. Rodríguez Mora & Kjetil Storesletten & Fabrizio Zilibotti, 2003. "The Survival of the Welfare State," American Economic Review, American Economic Association, vol. 93(1), pages 87-112, March.
  10. Song, Zheng, 2008. "The Dynamics of Inequality and Social Security in General Equilibrium," MPRA Paper 10365, University Library of Munich, Germany.
  11. 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.
  12. Azariadis, Costas & Galasso, Vincenzo, 2002. "Fiscal Constitutions," Journal of Economic Theory, Elsevier, vol. 103(2), pages 255-281, April.
  13. Angus Deaton & Christina Paxson, 1993. "Intertemporal Choice and Inequality," NBER Working Papers 4328, National Bureau of Economic Research, Inc.
  14. Vincenzo Galasso & Paola Profeta, 2003. "Lessons for an Aging Society: The Political Sustainability of Social Security Systems," Working Papers 244, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  15. Assar Lindbeck & Jörgen Weibull, 1987. "Balanced-budget redistribution as the outcome of political competition," Public Choice, Springer, vol. 52(3), pages 273-297, January.
  16. 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.
  17. 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.
  18. 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.
  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. 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.
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