The Political Economy of Redistributive Social Security

22 Pages Posted: 14 Feb 2006

See all articles by Pierre Pestieau

Pierre Pestieau

University of Liège - Research Center on Public and Population Economics; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute); Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE)

Date Written: December 1999

Abstract

Population aging puts significant pressure on social security systems that are based mainly on a pay-as-you-go (PAYG) formula and determined by the political process in which both retirees and future retirees participate. This paper demonstrates that in an economic and demographic steady state, majoritarian democracy overspends on social security. It then shows that in case of demographic shock, the regular majority process can be paralyzed by the development of entrenched interest groups that could lose from majority decisions. Depending on the way these entrenched interests operate, they can be judged more or less desirable from the viewpoint of social justice.

Keywords: social security, majority voting, entitlements, aging

JEL Classification: H55, 041, 09

Suggested Citation

Pestieau, Pierre, The Political Economy of Redistributive Social Security (December 1999). IMF Working Paper No. 99/180, Available at SSRN: https://ssrn.com/abstract=880835

Pierre Pestieau (Contact Author)

University of Liège - Research Center on Public and Population Economics ( email )

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CESifo (Center for Economic Studies and Ifo Institute)

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Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE) ( email )

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Belgium

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