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Social security, retirement, and the single-mindedness of the electorate

We propose a positive theory that is consistent with two important features of social security programs around the world: (1) they redistribute income from young to old and (2) they induce retirement. We construct a voting model that includes a “political campaign” or “debate” prior to the election. The model incorporates “single-mindedness” of the groups that do not work: while the workers divide their political capital between their “age concerns” and “occupational concerns”, the retired concentrate all their political capital to support their age group. In our model, the elderly end up getting transfers from the government (paid by the young) and distortionary labor income taxes induce the retirement of the elderly. In addition, our model predicts that occupational groups that work more will tend to have more political power. The opposite is true for non-occupational groups (such as the elderly). We provide some evidence that supports these additional predictions.

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Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 686.

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Date of creation: May 2003
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Handle: RePEc:upf:upfgen:686
Contact details of provider: Web page: http://www.econ.upf.edu/

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  28. John Douglas Wilson, 1990. "Are Efficiency Improvements In Government Transfer Policies Self-Defeating In Political Equilibrium?," Economics and Politics, Wiley Blackwell, vol. 2(3), pages 241-258, November.
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