The Political Economy of Social Security

29 Pages Posted: 8 Feb 2001

See all articles by Georges Casamatta

Georges Casamatta

Toulouse School of Economics (GREMAQ-CNRS); Centre for Economic Policy Research (CEPR)

Helmuth Gremer

University of Toulouse 1

Pierre Pestieau

University of Liege - Research Center on Public and Population Economics; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute); Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE)

Date Written: March 2000

Abstract

We consider a two-period overlapping generations model in which individual voters differ by age and by productivity. In such a setting, a redistributive Pay-As-You-Go system is politically sustainable, even when the interest rate is larger than the rate of population growth. The workers with medium wages (not those with the lowest wages) and the retirees form a majority which votes for a positive level of social security. This level depends on the difference between population growth and interest rate and on the redistributiveness of the benefit rule.

Keywords: Social security, majority voting

JEL Classification: H55, O41, O9

Suggested Citation

Casamatta, Georges and Gremer, Helmuth and Pestieau, Pierre, The Political Economy of Social Security (March 2000). CESifo Working Paper Series No. 259. Available at SSRN: https://ssrn.com/abstract=258969

Georges Casamatta

Toulouse School of Economics (GREMAQ-CNRS) ( email )

Manufacture des Tabacs (bât. F)
21 Allee de Brienne
31000 Toulouse
France

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Helmuth Gremer (Contact Author)

University of Toulouse 1

Place Anatole France
Toulouse Cedex, F-31042
France

Pierre Pestieau

University of Liege - Research Center on Public and Population Economics ( email )

Boulevard du Rectorat, 7, Batiment 31
Sart-Tilman
B-4000 Liege, 4000
Belgium
+32 4 366 3108 (Phone)
+32 4 366 3106 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE) ( email )

34 Vopie Roman Pays
Louvain la Neuve
Belgium

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