On the Political Complementarity between Health Care and Social Security

36 Pages Posted: 10 May 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: May 2001

Abstract

The dramatic rise in the US social security and public health expenditure is only partially explained by the demographic trend. We suggest that the political complementarity between these two programs induced a multiplicative response to the ageing process. Public health care increases the political constituency in favour of social security, and vice versa. 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 effect, whose empirical relevance is confirmed by independent studies, 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 favour 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: D72, H53, H55

Suggested Citation

Bethencourt, Carlos and Galasso, Vincenzo, On the Political Complementarity between Health Care and Social Security (May 2001). CEPR Discussion Paper No. 2788. Available at SSRN: https://ssrn.com/abstract=269379

Carlos Bethencourt (Contact Author)

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

University of Lugano ( email )

Via Giuseppe Buffi 13
Lugano, 6900
Switzerland

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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