A Positive Theory of Social Security

Guido Tabellini

No 394, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: In many countries social security is a large fraction of the government budget. Why should this be so, given that at any moment in time the number of recipients of social security benefits is smaller than the number of contributors? More generally, what determines the size of social security? To answer these questions, this paper studies an overlapping generations model in which all individuals currently alive vote on social security. There is no commitment to preserve the legislation inherited from the past. Voters are weakly altruistic, and there is heterogeneity within each generation. The paper shows that in equilibrium the size of social security is larger the greater is the proportion of elderly people in the population, and the greater is the inequality of pre-tax income. Both predictions of the theory are supported by the empirical evidence in cross-country data.

Keywords: Commitment; Median Voter; Social Security (search for similar items in EconPapers)
Date: 1990-04
References: Add references at CitEc
Citations: View citations in EconPapers (37)

Downloads: (external link)
http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=394 (application/pdf)

Related works:
Journal Article: A Positive Theory of Social Security (2000)
Working Paper: A Positive Theory of Social Security (1990)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:394

Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... pers/dp.php?dpno=394

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().