The Redistributive Design of Social Security Systems

27 Pages Posted: 1 Jun 2007

See all articles by J. Ignacio Conde-Ruiz

J. Ignacio Conde-Ruiz

Foundation for Applied Economic Research (FEDEA)

Paola Profeta

Bocconi University - Department of Policy Analysis and Public Management; CESifo (Center for Economic Studies and Ifo Institute)

Abstract

Countries with low intragenerational redistribution in social security systems (Bismarckian) are associated with larger public pension expenditures, a smaller fraction of private pension and lower income inequality than countries with more redistributive social security (Beveridgean). This article introduces a bidimensional voting model to account for these features. Agents different in age, income and in their ability to invest in the capital market vote on the degree of redistribution of the social security system and on the size of the transfer. In an economy with three income groups, a small Beveridgean system is supported by low-income agents, who gain from its redistributive feature, and high-income individuals, who seek to minimise their tax contribution and to invest in a private scheme. Middle-income individuals instead favour a large Bismarckian system.

Suggested Citation

Conde-Ruiz, J. Ignacio and Profeta, Paola, The Redistributive Design of Social Security Systems. Economic Journal, Vol. 117, No. 520, pp. 686-712, April 2007. Available at SSRN: https://ssrn.com/abstract=990113 or http://dx.doi.org/10.1111/j.1468-0297.2007.02046.x

J. Ignacio Conde-Ruiz (Contact Author)

Foundation for Applied Economic Research (FEDEA) ( email )

Jorge Juan 46
Madrid, 28001
Spain
+34 91 435 9020 (Phone)
+34 91 577 9575 (Fax)

Paola Profeta

Bocconi University - Department of Policy Analysis and Public Management ( email )

Via Roentgen 1
Milan, 20136
Italy

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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