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What social security: Beveridgean or Bismarckian?

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  • J. Ignacio Conde
  • Paola Profeta

Abstract

Why are Bismarckian social security systems associated with larger public pension expenditures, a smaller fraction of private pension and lower income in-equality than Beveridgean systems? These facts are puzzling for political economy theories of social security which predict that Beveridgean systems, involving intra-generational redistribution, should enjoy larger support among low-income people and thus be larger. This paper explains these features in a bidimensional political economy model. In an economy with three income groups, low-income support a large, redistributive system; middle-income favor an earning-related system, while high-income oppose any public system, since they have access to a superior saving technology, a private system. We show that, if income inequality is large, the voting majority of high-income and low-income supports a (small) Beveridgean system, and a large private pillar arises; the opposite occurs with low inequality. Additionally, when the capital market provides higher returns, a Beveridgean system is more likely to emerge.

Suggested Citation

  • J. Ignacio Conde & Paola Profeta, 2002. "What social security: Beveridgean or Bismarckian?," Economics Working Papers 633, Department of Economics and Business, Universitat Pompeu Fabra.
  • Handle: RePEc:upf:upfgen:633
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Gautier, Axel & Wauthy, Xavier, 2012. "Competitively neutral universal service obligations," Information Economics and Policy, Elsevier, vol. 24(3), pages 254-261.
    2. Vincenzo Galasso & Paola Profeta, 2004. "Lessons for an ageing society: the political sustainability of social security systems," Economic Policy, CEPR;CES;MSH, vol. 19(38), pages 63-115, April.
    3. Rainald Borck, 2007. "On the Choice of Public Pensions when Income and Life Expectancy Are Correlated," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 9(4), pages 711-725, August.
    4. Alessandro Sommacal, 2006. "Pension systems and intragenenerational redistribution when labor supply is endogenous," Oxford Economic Papers, Oxford University Press, vol. 58(3), pages 379-406, July.
    5. Mathieu Lefèbvre, 2007. "The Redistributive Effects of Pension Systems in Europe: A Survey of Evidence," LIS Working papers 457, LIS Cross-National Data Center in Luxembourg.
    6. Frieda Vandeninden, 2010. "Social Pensions in Europe: The Aim, The Impact and The Cost," CREPP Working Papers 1007, Centre de Recherche en Economie Publique et de la Population (CREPP) (Research Center on Public and Population Economics) HEC-Management School, University of Liège.
    7. Rossignol, Stephane & Taugourdeau, Emmanuelle, 2004. "Social insurance with representative democracy," Economics Letters, Elsevier, vol. 82(1), pages 127-134, January.
    8. Vandeninden, Frieda, 2012. "A Simulation of Social Pensions in Europe," MERIT Working Papers 008, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    9. Dariusz Stanko, 2004. "Social Security in Theory and Practice: An Essay," Public Economics 0401007, EconWPA.
    10. Juan Prieto & Juan Gabriel Rodríguez & Rafael Salas, "undated". "Polarization, Inequality and Tax Reforms," Working Papers 2003-23, FEDEA.

    More about this item

    Keywords

    Political economy; public versus private social security; pensions system across european countries; income inequality; structure-induced equilibrium;

    JEL classification:

    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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