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Article
Demographic shock and social security: A political economy perspective
International Tax and Public Finance (2001)
  • Georges Casamatta
  • Helmuth Cremer
  • Pierre Pestieau
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.

Disciplines
Publication Date
August, 2001
Citation Information
Georges Casamatta, Helmuth Cremer and Pierre Pestieau. "Demographic shock and social security: A political economy perspective" International Tax and Public Finance Vol. 8 Iss. 4 (2001)
Available at: http://works.bepress.com/georges_casamatta/6/