The Political Economy of Social Security

Casamatta, Georges; Gremer, Helmuth; Pestieau, Pierre

doi:10.2139/ssrn.258969

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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)

University of Liège - 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: Suggested Citation

Casamatta, Georges and Gremer, Helmuth and Pestieau, Pierre, The Political Economy of Social Security (March 2000). Available at SSRN: https://ssrn.com/abstract=258969 or http://dx.doi.org/10.2139/ssrn.258969