On the Political Complementarity between Health Care and Social Security

IGIER Working Paper No. 184

29 Pages Posted: 6 Apr 2001

See all articles by Carlos Bethencourt

Carlos Bethencourt

University of La Laguna - Department of Applied Economics; CAERP

Vincenzo Galasso

Centre for Economic Policy Research (CEPR); Bocconi University; University of Bocconi - Innocenzo Gasparini Institute for Economic Research (IGIER); CESifo (Center for Economic Studies and Ifo Institute); Bocconi University - Baffi Carefin Centre

Multiple version iconThere are 2 versions of this paper

Date Written: November 2000

Abstract

The dramatic rise in the US social security and public health expenditure is only partially explained by the demographic trend, and may be due to the political complementarity between these two programs. We suggest that public health care increases the political constituency in favor of social security, and viceversa. Specifically, public health decreases the longevity differential between low and high-income individuals, therefore rising the retirement period, and the total pension benefits of the former relatively to the latter. This increases the political support for social security among the low-income young. We show that in a political equilibrium of a two-dimensional majoritarian election, a voting majority of low-income young and all retirees supports a large welfare state. Its composition between public health and social security is determined by intermediate (median) income types, who favor a combination of the two programs, since public health increases their longevity enough to make social security more attractive.

Keywords: endogenous longevity, subgame perfect structure induced equilibrium

JEL Classification: H53, H55, D72

Suggested Citation

Bethencourt, Carlos and Galasso, Vincenzo and Galasso, Vincenzo, On the Political Complementarity between Health Care and Social Security (November 2000). IGIER Working Paper No. 184, Available at SSRN: https://ssrn.com/abstract=265897 or http://dx.doi.org/10.2139/ssrn.265897

Carlos Bethencourt

University of La Laguna - Department of Applied Economics ( email )

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Vincenzo Galasso (Contact Author)

Centre for Economic Policy Research (CEPR)

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Bocconi University ( email )

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University of Bocconi - Innocenzo Gasparini Institute for Economic Research (IGIER)

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