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

University of Lugano; Centre for Economic Policy Research (CEPR)

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, 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 )

Campus de Guajara
Camino de la Hornera
La Laguna, Tenerife 38071
Spain
+34 922 317117 (Phone)
+34 922 253742 (Fax)

HOME PAGE: http://webpages.ull.es/users/cbethenc/

CAERP

http://www.caerp.com/
C/ Perez de Rosas, Dcha.
Santa Cruz de Tenerife, Tenerife 38004
Spain

HOME PAGE: http://www.caerp.com

Vincenzo Galasso (Contact Author)

University of Lugano ( email )

Via Giuseppe Buffi 13
Lugano, 6900
Switzerland

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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