IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

The Political Economy of Social Security and Public Goods Provision in a Borrowing-constrained Economy

  • Ryo Arawatari


    (Faculty of Economics, Shinshu University)

  • Tetsuo Ono


    (Graduate School of Economics, Osaka University)

This paper introduces an overlapping generations model with earnings heterogeneity and borrowing constraints. The labor income tax and the allocation of tax revenue across social security and public goods provision are determined in a bidimensional majoritarian voting game played by successive generations. The political equilibrium is characterized by an ends-against-the-middle equilibrium where lowand high-income individuals form a coalition in favor of a low tax rate and less social security while middle-income individuals favor a high tax rate and greater social security. Government spending then shifts from social security to public goods provision if either: (i) higher wage inequality is associated with the borrowing constraint and a low intertemporal elasticity of substitution, or (ii) the population growth rate becomes lower.

To our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.

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 09-38.

in new window

Length: 38 pages
Date of creation: Nov 2009
Date of revision:
Handle: RePEc:osk:wpaper:0938
Contact details of provider: Web page:

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Simonovits, Andras, 2007. "Can population ageing imply a smaller welfare state?," European Journal of Political Economy, Elsevier, vol. 23(2), pages 534-541, June.
  2. Persson, Torsten & Tabellini, Guido, 1994. "Is Inequality Harmful for Growth?," American Economic Review, American Economic Association, vol. 84(3), pages 600-621, June.
  3. Razin, A. & Sadka, E. & Swagel, P., 2000. "The Aging Population and the Size of the Welfare State," Papers 2000-23, Tel Aviv.
  4. Conde-Ruiz, José Ignacio & Galasso, Vincenzo, 1999. "Positive Arithmetic of the Welfare State," CEPR Discussion Papers 2202, C.E.P.R. Discussion Papers.
  5. J. Ignacio Conde-Ruiz & Paola Profeta, 2007. "The Redistributive Design of Social Security Systems," Working Papers 2007-07, FEDEA.
  6. Rainald Borck, 2003. "On the Choice of Public Pensions when Income and Life Expectancy Are Correlated," Discussion Papers of DIW Berlin 369, DIW Berlin, German Institute for Economic 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. Bénabou, Roland, 1996. "Inequality and Growth," CEPR Discussion Papers 1450, C.E.P.R. Discussion Papers.
  9. Romer, Thomas, 1975. "Individual welfare, majority voting, and the properties of a linear income tax," Journal of Public Economics, Elsevier, vol. 4(2), pages 163-185, February.
  10. Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-27, October.
  11. Alesina, Alberto F & Rodrik, Dani, 1991. "Distributive Politics and Economic Growth," CEPR Discussion Papers 565, C.E.P.R. Discussion Papers.
  12. 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.
  13. Michele Boldrin & Aldo Rustichini, 2000. "Political Equilibria with Social Security," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(1), pages 41-78, January.
  14. Conde-Ruiz, José Ignacio & Galasso, Vincenzo, 2000. "Early Retirement," CEPR Discussion Papers 2589, C.E.P.R. Discussion Papers.
  15. Boadway, R.W. & Wildasin, D.E., 1987. "A median voter model of social security," CORE Discussion Papers 1987014, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  16. CREMER, Helmuth & DE DONDER, Philippe & MALDONADO, Dario & PESTIEAU, Pierre, . "Voting over type and generosity of a pension system when some individuals are myopic," CORE Discussion Papers RP 2051, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  17. Zheng Song & Kaiji Chen, 2009. "Markovian Social Security in Unequal Societies," 2009 Meeting Papers 318, Society for Economic Dynamics.
  18. Casamatta, Georges & Cremer, Helmuth & Pestieau, Pierre, 2000. " The Political Economy of Social Security," Scandinavian Journal of Economics, Wiley Blackwell, vol. 102(3), pages 503-22, June.
  19. Peter Gottschalk & Timothy M. Smeeding, 1997. "Cross-National Comparisons of Earnings and Income Inequality," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 633-687, June.
  20. Roberts, Kevin W. S., 1977. "Voting over income tax schedules," Journal of Public Economics, Elsevier, vol. 8(3), pages 329-340, December.
  21. Thomas F. Cooley & Jorge Soares, 1999. "A Positive Theory of Social Security Based on Reputation," Journal of Political Economy, University of Chicago Press, vol. 107(1), pages 135-160, February.
  22. Roland Benabou, 2000. "Unequal Societies: Income Distribution and the Social Contract," American Economic Review, American Economic Association, vol. 90(1), pages 96-129, March.
  23. Bethencourt, Carlos & Galasso, Vincenzo, 2008. "Political complements in the welfare state: Health care and social security," Journal of Public Economics, Elsevier, vol. 92(3-4), pages 609-632, April.
  24. Alberto Alesina & Dani Rodrik, 1994. "Distributive Politics and Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 109(2), pages 465-490.
  25. Diamond, P. A. & Hausman, J. A., 1984. "Individual retirement and savings behavior," Journal of Public Economics, Elsevier, vol. 23(1-2), pages 81-114.
  26. Francisco Rodríguez, 2004. "Inequality, Redistribution, And Rent-Seeking," Economics and Politics, Wiley Blackwell, vol. 16, pages 287-320, November.
  27. Hu, Sheng Cheng, 1982. "Social Security, Majority-Voting Equilibrium and Dynamic Efficiency," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 23(2), pages 269-87, June.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:osk:wpaper:0938. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Atsuko SUZUKI)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.