Aging, Inequality and Social Security

Ryo Arawatari () and Tetsuo Ono

No 08-19, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP)

Abstract: This paper develops an overlapping-generations model including wage inequality within a generation and intra- and intergenerational resource reallocation via social security. Based on the concept of a stationary Markov perfect equilibrium, the paper focuses on the feedback mechanism between current individualsf decisions on saving and future voting on social security. The paper demonstrates the determination of social security via probabilistic voting and its consequence for consumption inequality within a generation. It is shown that when the elderly are politically powerful, (i) the economy attains an oscillatory path of inequality and social security, and (ii) aging may reduce consumption inequality.

Keywords: Aging; Inequality; Social security; Political Economy; Stationary Markov Perfect Equilibrium (search for similar items in EconPapers)
JEL-codes: D72 H55 J10 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-age, nep-dge, nep-lab, nep-pol and nep-pub
Date: 2008-04
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Persistent link: http://EconPapers.repec.org/RePEc:osk:wpaper:0819

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