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Voting over Social Security with Uncertain Lifetimes

Author

Listed:
  • De Donder, P.
  • Hindriks, J.

Abstract

This paper examines the intragenerational redistribution aspect of social security. The level of social security is determined by majority voting between individuals who differ (ex-ante) in their earning ability and life expectancy. Given incentive effects, the voting equilibrium depends on balancing the redistributive gains that social security provides to a majority against the efficiency costs of distorting economic behaviour. The impact of alternative benefit structures on the equilibrium level of social security is analysed. It is shown that the conventional wisdom stating that "tightening the link" between benefits and contributions will reduce the distortionary effect of social security does not survive the introduction of political economy considerations. We also show that the introduction of means-testing does not necessarily lead to a decrease in the size of social security. The impact on the equilibrium level of social security of a correlation between productivity and the probability of receiving benefits is also analysed.

Suggested Citation

  • De Donder, P. & Hindriks, J., 1999. "Voting over Social Security with Uncertain Lifetimes," Discussion Papers 9921, University of Exeter, Department of Economics.
    • Handle: RePEc:exe:wpaper:9921
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    Citations

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    Cited by:

    1. M.L. Leroux & P. Pestieau, 2014. "Social Security and Family Support," Canadian Journal of Economics, Canadian Economics Association, vol. 47(1), pages 115-143, February.
    2. J. Ignacio Conde-Ruiz & Paola Profeta, 2007. "The Redistributive Design of Social Security Systems," Economic Journal, Royal Economic Society, vol. 117(520), pages 686-712, April.
    3. Mahieu, Géraldine & Rottier, Stéphane, 1998. "Pensions and Voting Equilibria in an Overlapping Generation Model with Heterogeneous Agents," LIDAM Discussion Papers IRES 1999031, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES), revised 00 Nov 1999.
    4. Galasso, Vincenzo & Profeta, Paola, 2007. "How does ageing affect the welfare state?," European Journal of Political Economy, Elsevier, vol. 23(2), pages 554-563, June.

    More about this item

    Keywords

    SOCIAL SECURITY ; VOTING ; PENSION FUNDS;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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