The Single-Mindedness Theory: Micro-foundation and Applications to Social Security Systems

Emanuele Canegrati

MPRA Paper from University Library of Munich, Germany

Abstract: The central purpose of this paper is to introduce a new political economy approach which explains the characteristics of Social Security Systems. This approach is based on the Single-Mindedness Theory (SMT), which assumes that the more single-minded groups are able to exert a greater power of influence on Governments and eventually obtain what they ask. Governments are seen as voting-maximizer policy-makers, whose unique goal is winning elections. Using an OLG model and a probabilistic voting approach, I analyse a society divided into two groups, the old and the young, which only dier for their preferences for leisure. I show that, to win elections, the Government sets the marginal tax rates taking into account the numerosity and the density of groups; eventually, the old receive a positive transfer, whose burden is entirely borne by the young. Furthermore, the more singleminded group (the old) is taxed with higher tax rates; this result can be explained by the necessity that the old have to find a way out to solve a free-riding problem amongst its members. Indeed, higher tax rates induce the old to retire earlier, so that retirees may have more time to participate in political activities and support the old group’s goals.

Keywords: probabilistic voting model; single-mindedness; social security systems (search for similar items in EconPapers)
JEL-codes: D31 D72 J22 J26 (search for similar items in EconPapers)
Date: 2006-09
New Economics Papers: this item is included in nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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https://mpra.ub.uni-muenchen.de/1223/1/MPRA_paper_1223.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/1298/1/MPRA_paper_1298.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/1667/1/MPRA_paper_1667.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/3638/1/MPRA_paper_3638.pdf revised version (application/pdf)

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