Electoral competition and the unfunding of public pension programs

Alvaro Forteza ()

No 101, Documentos de Trabajo (working papers) from Department of Economics - dECON

Abstract: Most public pension systems failed to build pension funds, even when it was clear that the benefits the systems were paying could not be sustained in the long run. I argue in this paper that politicians ruling public pension programs have strong incentives to exhaust the pension funds, offering generous pensions to old voters to raise the probability of winning the elections. Young voters do not support those electoral proposals to spend the pension fund, since a reduction of the fund will pull pensions down when they retire. The pension fund does not survive if old voters prevail, something that is likely to happen in the model in this paper despite of old voters being less than young voters. Electoral competition favors the elderly because they tend to be more willing to change their vote for a good pension than are young voters to change their vote for a larger pension fund.

Keywords: Electoral competition; Pensions; Probabilistic voting. (search for similar items in EconPapers)
JEL-codes: E69 H55 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2001-12
References: Add references at CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:ude:wpaper:0101

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