Renegotiation of Social Contracts by Majority Rule

Dan Anderberg and Carlo Perroni

No 269337, Economic Research Papers from University of Warwick - Department of Economics

Abstract: We consider renegotiation of social earnings insurance arrangements by majority voting in an economy where ex-ante identical individuals make unobservable private investments in education. We show that voting-based renegotiation can result in a higher expected level of investment in comparison to the case where social insurance is determined by an appointed social planner. We also ¯nd that, with voting-based renegotiation, the availability of costly ex-post information about private investment can help overcome commitment problems. These findings call into question the practice of using a representative-consumer approach when modelling dynamic policy problems in large economies.

Keywords: Agricultural and Food Policy; Teaching/Communication/Extension/Profession (search for similar items in EconPapers)
Pages: 29
Date: 2000-08-04
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Working Paper: Renegotiation of Social Contracts by Majority Rule (2000)
Working Paper: Renegotiation of Social Contracts by Majority Rule
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Persistent link: https://EconPapers.repec.org/RePEc:ags:uwarer:269337

DOI: 10.22004/ag.econ.269337

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