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The Single-Mindedness Theory: Micro-foundation and Applications to Social Security Systems

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  • canegrati, emanuele

Abstract

The central purpose of this paper is to introduce a new political economy approach which explains the characteristics of Social Security Systems. This approach is based on the Single-Mindedness Theory (SMT), which assumes that the more single-minded groups are able to exert a greater power of influence on Governments and eventually obtain what they ask. Governments are seen as voting-maximizer policy-makers, whose unique goal is winning elections. Using an OLG model and a probabilistic voting approach, I analyse a society divided into two groups, the old and the young, which only dier for their preferences for leisure. I show that, to win elections, the Government sets the marginal tax rates taking into account the numerosity and the density of groups; eventually, the old receive a positive transfer, whose burden is entirely borne by the young. Furthermore, the more singleminded group (the old) is taxed with higher tax rates; this result can be explained by the necessity that the old have to find a way out to solve a free-riding problem amongst its members. Indeed, higher tax rates induce the old to retire earlier, so that retirees may have more time to participate in political activities and support the old group’s goals.

Suggested Citation

  • canegrati, emanuele, 2006. "The Single-Mindedness Theory: Micro-foundation and Applications to Social Security Systems," MPRA Paper 1223, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:1223
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    References listed on IDEAS

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    8. Casey B. Mulligan & Xavier Sala-i-Martin, 1999. "Social security in theory and practice (II): Efficiency theories, narrative theories and implications for reform," Economics Working Papers 385, Department of Economics and Business, Universitat Pompeu Fabra.
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    Citations

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    Cited by:

    1. Andreas Oestreicher & Reinald Koch, 2011. "The Revenue Consequences of Using a Common Consolidated Corporate Tax Base to Determine Taxable Income in the EU Member States," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 67(1), pages 64-102, March.
    2. Emanuele, Canegrati, 2007. "A Contribution to the Positive Theory of Direct Taxation," MPRA Paper 6117, University Library of Munich, Germany.
    3. canegrati, emanuele, 2007. "A theory of the allocation of political time," MPRA Paper 1647, University Library of Munich, Germany.
    4. Emanuele, Canegrati, 2007. "The Single-mindedness theory: empirical evidence from the U.K," MPRA Paper 2832, University Library of Munich, Germany.
    5. Emanuele Canegrati, 2007. "A Contribution to the Positive Theory of Direct Taxation," LIS Working papers 469, LIS Cross-National Data Center in Luxembourg.

    More about this item

    Keywords

    probabilistic voting model; single-mindedness; social security systems;

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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