Voting over Social Security with Uncertain Lifetimes
Philippe De Donder () and
Jean Hindriks ()
Discussion Papers from University of Exeter, Department of Economics
This paper examines the intragenerational redistribution aspect of social security. The level of social security is determined by majority voting between individuals who differ (ex-ante) in their earning ability and life expectancy. Given incentive effects, the voting equilibrium depends on balancing the redistributive gains that social security provides to a majority against the efficiency costs of distorting economic behaviour. The impact of alternative benefit structures on the equilibrium level of social security is analysed. It is shown that the conventional wisdom stating that "tightening the link" between benefits and contributions will reduce the distortionary effect of social security does not survive the introduction of political economy considerations. We also show that the introduction of means-testing does not necessarily lead to a decrease in the size of social security. The impact on the equilibrium level of social security of a correlation between productivity and the probability of receiving benefits is also analysed.
Keywords: SOCIAL SECURITY; VOTING; PENSION FUNDS (search for similar items in EconPapers)
JEL-codes: D72 D78 H55 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:exe:wpaper:9921
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