The political economy of social security

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  • 1 January 2000
    • preprint
      • Published in RePEc
Abstract
We consider a two-period overlapping generations model in which individual voters differ not only according to age but also productivity. In such a setting, a (redistributive) Pay-As-You-Go system is politically sustainable, even when the interest rate is larger than the rate of population growth. The medium wages workers (not the lowest) join the retirees to form a majority and vote for a positive level of social security. This level depends on the difference between population growth and interest rate and on the redistributiveness of the benefit rule. (This abstract was borrowed from another version of this item.)

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