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Electoral competition and the unfunding of public pension programs

Author

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  • Alvaro Forteza

    (Departmento de Economía, Facultad de Ciencias Sociales, Universidad de la República)

Abstract

Most public pension systems failed to build pension funds, even when it was clear that the benefits the systems were paying could not be sustained in the long run. I argue in this paper that politicians ruling public pension programs have strong incentives to exhaust the pension funds, offering generous pensions to old voters to raise the probability of winning the elections. Young voters do not support those electoral proposals to spend the pension fund, since a reduction of the fund will pull pensions down when they retire. The pension fund does not survive if old voters prevail, something that is likely to happen in the model in this paper despite of old voters being less than young voters. Electoral competition favors the elderly because they tend to be more willing to change their vote for a good pension than are young voters to change their vote for a larger pension fund.

Suggested Citation

  • Alvaro Forteza, 2001. "Electoral competition and the unfunding of public pension programs," Documentos de Trabajo (working papers) 0101, Department of Economics - dECON.
    • Handle: RePEc:ude:wpaper:0101
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    File URL: https://hdl.handle.net/20.500.12008/1930
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    Cited by:

    1. Alvaro Forteza, 2003. "Seguridad social y competencia política," Documentos de Trabajo (working papers) 0403, Department of Economics - dECON.
    2. Zou, Tieding, 2014. "养老金亏空、延迟退休与改革阻力—— 基于投票理论视角 [Pension Shortfall, Later Retirement and Resistance to Reform —— Based on the Perspective of Voting Theory]," MPRA Paper 65147, University Library of Munich, Germany, revised 16 Sep 2014.

    More about this item

    Keywords

    Electoral competition; Pensions; Probabilistic voting.;
    All these keywords.

    JEL classification:

    • E69 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Other
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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