Demographic Shock and Social Security: A Political Economy Perspective

Posted: 7 Nov 2001

See all articles by Georges Casamatta

Georges Casamatta

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

Helmuth Cremer

University of Toulouse (GREMAQ & IDEI); Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute)

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)

Abstract

We assume that individual voters differ not only according to age but also productivity. In the steady state, workers with wages in the intermediate range join the retired persons to form a majority and vote for a positive level of social security. When a shock decreases population growth, entrenched interests can constrain majority voting decisions and prevent reforms in the name of entitlements. We show that from a Rawlsian viewpoint it may be desirable to rely on these entitlements to protect the low wage earners of the transition generations. However, when the possibility of fixing a basic pension is introduced, it constitutes a better instrument than entitlements.

Keywords: Social security, majority voting, entitlements, aging

Suggested Citation

Casamatta, Georges and Cremer, Helmuth and Pestieau, Pierre, Demographic Shock and Social Security: A Political Economy Perspective. International Tax and Public Finance, Vol. 8, No. 4, pp. 417-431, August 2001. Available at SSRN: https://ssrn.com/abstract=285514

Georges Casamatta (Contact Author)

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 Cremer

University of Toulouse (GREMAQ & IDEI) ( email )

Toulouse, 31000
France
+33 1 6112 8606 (Phone)
+33 1 6112 8637 (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

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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