On the Political Economy of Social Security and Public Education

20 Pages Posted: 22 Nov 2004

See all articles by Panu Poutvaara

Panu Poutvaara

University of Helsinki - Department of Economics; Helsinki Center of Economic Research (HECER); CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics

Date Written: November 2004

Abstract

This paper analyzes simultaneous voting on the wage tax rate and investment in public education with three overlapping generations and productivity differences inside each cohort. Wage tax revenue finances public education and social security benefits. The presence of productivity differences introduces a time-consistency problem with repeated voting. This can be solved by trigger strategies which do not punish upward deviations in the wage tax rate. If there are multiple equilibria, then higher tax rates are associated with more education. Surprisingly, the median voter may be a young citizen even when cohorts are of the same size.

JEL Classification: H52, H55, D72

Suggested Citation

Poutvaara, Panu, On the Political Economy of Social Security and Public Education (November 2004). Available at SSRN: https://ssrn.com/abstract=265427 or http://dx.doi.org/10.2139/ssrn.265427

Panu Poutvaara (Contact Author)

University of Helsinki - Department of Economics ( email )

P.O. Box 54
FIN-00014 Helsinki
Finland

HOME PAGE: http://www.valt.helsinki.fi/blogs/poutvaar/

Helsinki Center of Economic Research (HECER) ( email )

FI-00014 Helsinki
Finland

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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