Why are more redistributive social security systems smaller? A median voter approach

Koethenbuerger, Marko; Poutvaara, Panu; Profeta, Paola

doi:10.1093/oep/gpm043

Cited by 30 publications

(25 citation statements)

References 28 publications

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“…By contrast, the decisive voter for the transfer program is more likely to be a young agent for whom income mobility is a critical issue. The fact that, for both programs, the median voter is either a young or middle-aged citizen is consistent with the empirical evidence (Galasso, 1999;Koethenbuerger et al, 2008). …”

Section: Political Equilibriasupporting

confidence: 84%

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Income Inequality, Mobility, and the Welfare State: A Political Economy Model

Bossi

Gümüş

2012

Macroecon. Dynam.

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. www.econstor.eu The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit organization supported by Deutsche Post Foundation. The center is associated with the University of Bonn and offers a stimulating research environment through its international network, workshops and conferences, data service, project support, research visits and doctoral program. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. Terms of use: Documents in D I S C U S S I O N P A P E R S E R I E SIZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author. In this paper, we set up a three-period stochastic overlapping generations model to analyze the implications of income inequality and mobility for demand for redistribution and social insurance. We model the size of two different public programs under the welfare state. We investigate bidimensional voting on the tax rates that determine the allocation of government revenues among transfer payments and old-age pensions. We show that the coalitions formed, the resulting political equilibria, and the demand for redistribution crucially depend on the level of income inequality and mobility.JEL Classification: D72, H53, H55

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Section: Political Equilibriasupporting

confidence: 84%

“…From (A.8), G θ = β{2Ψ θ + θΨ θθ } + τ Ψ θθ 2λ < 0. Now we check the sign of the numerator in (22). We have G e H = βΨ e H = 2β(1 − λ) and G e L = βΨ e L − 1 = 2βλ − 1.…”

Section: A12 Effect Of Rising Inequality On θmentioning

confidence: 99%

Income Inequality, Mobility, and the Welfare State: A Political Economy Model

Bossi

Gümüş

2012

Macroecon. Dynam.

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“…However, if the main problem of existing retirement systems is that they are too large, another solution would be to increase the progressivity of the system. Indeed, as highlighted by Koethenbuerger (2007), the size of the retirement system chosen by the median voter tends to decrease as the link between contributions and bene…ts is loosened. It is a fact that progressive systems appear smaller than actuarially fair systems.…”

Section: Optimal Growthmentioning

confidence: 99%

Increased longevity and social security reform: questioning the optimality of individual accounts when education matters

Garrec

2014

J Popul Econ

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In many European countries, population aging had led to debate about a switch from conventional unfunded public pension systems to notional systems characterized by individual accounts. In this article, we develop an overlapping generations model in which endogenous growth is based on an accumulation of knowledge driven by the proportion of skilled workers and by the time they have spent in training. In such a framework, we show that conventional pension systems, contrary to notional systems, can enhance economic growth by linking bene…ts only to the partial earnings history. Thus, to ensure economic growth, the optimal adjustment to increased longevity could consist in increasing the size of existing retirement systems rather than switching to notional systems.

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“…Koethenbuerger et al . () develop an analytical political economic model, where voters choose the size of the social security system given the exogenous composition of the benefits, and show that as the relative size of the earnings‐dependent component increases, the size of the system increases. This paper is different from theirs in many dimensions.…”

Section: Introductionmentioning

confidence: 99%

Social Security: Universal Versus Earnings‐dependent Benefits

Soares

2012

Economica

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I compare the welfare implications of Bismarckian (earnings‐dependent benefits) and Beveridgean (universal benefits) social security systems. Agents are better off with a Beveridgean system than with a comparable Bismarckian system. In an environment with intragenerational homogeneity, the latter results in a larger decrease in net wages; with intragenerational skill heterogeneity, most agents benefit from the more redistributive Beveridgean system. When agents vote for the replacement rates, with intragenerational homogeneity, the resulting Bismarckian system is larger than the Beveridgean system. With intragenerational skill heterogeneity, the Beveridgean system is larger. Overall, agents are worse off with the larger system.

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Why are more redistributive social security systems smaller? A median voter approach

Cited by 30 publications

References 28 publications

Income Inequality, Mobility, and the Welfare State: A Political Economy Model

Income Inequality, Mobility, and the Welfare State: A Political Economy Model

Increased longevity and social security reform: questioning the optimality of individual accounts when education matters

Social Security: Universal Versus Earnings‐dependent Benefits

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