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A Political Economy Theory of Government Debt and Social Security

  • Ryo Arawatari

    ()

    (Graduate School of Economics, Nagoya University)

  • Tetsuo Ono

    ()

    (Graduate School of Economics, Osaka University)

This paper analyzes the determinants of government debt and social security for the old in a closed-economy, overlapping-generation model. Under the probabilistic voting, the model presents (i) an intergenerational link of resource allocation via debt and social security; (ii) multiple political equilibria; and (iii) a negative cor- relation between tax and debt. These three results are robust to the introduction of public goods as an alternative government expenditure or to the introduction of income heterogeneity within a generation.

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File URL: http://www2.econ.osaka-u.ac.jp/library/global/dp/1133.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 11-33.

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Length: 34 pages
Date of creation: Nov 2011
Date of revision:
Handle: RePEc:osk:wpaper:1133
Contact details of provider: Web page: http://www.econ.osaka-u.ac.jp/
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  1. Ryo Arawatari & Tetsuo Ono, 2008. "A Second Chance at Success: A Political Economy Perspective," Discussion Papers in Economics and Business 08-04-Rev, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP), revised Jul 2008.
  2. Zheng Song & Kjetil Storesletten & Fabrizio Zilibotti, 2007. "Rotten Parents and Disciplined Children: A Politico-Economic Theory of Public Expenditure and Debt," 2007 Meeting Papers 685, Society for Economic Dynamics.
  3. J. Ignacio Conde-Ruiz & Vincenzo Galasso, 2003. "Early Retirement," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(1), pages 12-36, January.
  4. Martín Gonzalez-Eiras & Dirk Niepelt, 2011. "Ageing, Government Budgets, Retirement, and Growth," CESifo Working Paper Series 3352, CESifo Group Munich.
  5. Gonzalez-Eiras, Marti­n & Niepelt, Dirk, 2008. "The future of social security," Journal of Monetary Economics, Elsevier, vol. 55(2), pages 197-218, March.
  6. Grossman, Gene & Helpman, Elhanan, 1996. "Intergenerational Redistribution with Short-lived Governments," CEPR Discussion Papers 1396, C.E.P.R. Discussion Papers.
  7. Hassler, John & Storesletten, Kjetil & Zilibotti, Fabrizio, 2007. "Democratic public good provision," Journal of Economic Theory, Elsevier, vol. 133(1), pages 127-151, March.
  8. Vincenzo Galasso, 2006. "The Political Future of Social Security in Aging Societies," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262072734, June.
  9. 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.
  10. Yashiro, Naohiro, 1997. "Aging of the population in Japan and its implications to the other Asian countries," Journal of Asian Economics, Elsevier, vol. 8(2), pages 245-261.
  11. D'Amato, Marcello & Galasso, Vincenzo, 2010. "Political intergenerational risk sharing," Journal of Public Economics, Elsevier, vol. 94(9-10), pages 628-637, October.
  12. 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.
  13. Krusell, Per & Quadrini, Vincenzo & Rios-Rull, Jose-Victor, 1997. "Politico-economic equilibrium and economic growth," Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 243-272, January.
  14. Deborah Roseveare & Willi Leibfritz & Douglas Fore & Eckhard Wurzel, 1996. "Ageing Populations, Pension Systems and Government Budgets: Simulations for 20 OECD Countries," OECD Economics Department Working Papers 168, OECD Publishing.
  15. Azariadis, Costas & Galasso, Vincenzo, 2002. "Fiscal Constitutions," Journal of Economic Theory, Elsevier, vol. 103(2), pages 255-281, April.
  16. 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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