Gerontracy, Retirement, and Social Security

Universitat Pompeu Fabra, Department of Economics Working Paper No. 383

60 Pages Posted: 21 Jul 1999

See all articles by Casey B. Mulligan

Casey B. Mulligan

University of Chicago; National Bureau of Economic Research (NBER)

Xavier Sala-i-Martin

Columbia University, Graduate School of Arts and Sciences, Department of Economics

Date Written: April 23, 1999

Abstract

Why are the old politically successful? We build a simple interest group model in which political pressure is time-intensive, showing that in the political competitive equilibrium each group lobbies for government policies that lower their own value of time but the old do so to a greater extent and as a result are net gainers from the political process. What distinguishes the elderly from other political groups (and what makes them more succesful) is that they have lower labor productivity and/or that we are all likely to become elderly at some point, while we are relatively unlikely to change gender, race, sexual orientation, or even ocupation, The model has a variety of implications for the design of social security programs, which we test using data from the Social Security Administration. For example, the model predicts that social security programs with retirement incentives are larger and that the old are more "single-minded" in their politics, implications which we verify using cross-country government finance data and cross- country political participation surveys. Finally, we show that the forced savings programs intended to "reform" the social security system may increase the amount of intergenerational redistribution. As a model for evaluating policy reforms, ours has the attractive feature that reforms must be time time consistent from a political point of view rather than a public interest point of view.

JEL Classification: H40, H55

Suggested Citation

Mulligan, Casey B. and Sala-i-Martin, Francesc Xavier, Gerontracy, Retirement, and Social Security (April 23, 1999). Universitat Pompeu Fabra, Department of Economics Working Paper No. 383. Available at SSRN: https://ssrn.com/abstract=166834 or http://dx.doi.org/10.2139/ssrn.166834

Casey B. Mulligan (Contact Author)

University of Chicago ( email )

1126 East 59th Street
Chicago, IL 60637
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773-702-9017 (Phone)
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National Bureau of Economic Research (NBER)

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Francesc Xavier Sala-i-Martin

Columbia University, Graduate School of Arts and Sciences, Department of Economics ( email )

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New York, NY 10027
United States
212-854-7055 (Phone)

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