Public Education and Pensions in Democracy: A Political Economy Theory

Francesco Lancia and Alessia Russo

Journal of the European Economic Association, 2016, vol. 14, issue 5, 1038-1073

Abstract: A dynamic political economy theory of fiscal policy is presented to explain the simultaneous existence of public education and pensions in modern democracies. The driving force of the model is the intergenerational conflict over the allocation of the public budget. Successive generations of voters choose fiscal policies through repeated elections. The political power of elderly voters creates the motive for adults to support public investment in the human capital of future generations since it expands future pension possibilities. We characterize the Markov perfect equilibrium of the voting game in a small open economy. The equilibrium reproduces salient features of intergenerational fiscal policies in modern economies.

JEL-codes: D72 E62 H23 H30 H53 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (42)

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Related works:
Journal Article: PUBLIC EDUCATION AND PENSIONS IN DEMOCRACY: A POLITICAL ECONOMY THEORY (2016)
Working Paper: Public Education and Pensions in Democracy: A Political Economy Theory (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:oup:jeurec:v:14:y:2016:i:5:p:1038-1073.

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