SFB 303 Discussion Paper No. A - 279

Author: Weizsäcker, Robert K. von
Title: Population Aging and Social Security: A Politico-Economic Model of State Pension Financing
Abstract: The present paper attempts to provide a positive, politico-economic explanation of actual social security policies. A theoretical framework is devised which integrates individual utility maximization and governmental maximization of expected political support. Individual support depends on how net economic benefit from a pay-as-you-go financed state pension scheme is translated into a probability of voting for the government. The relation between net economic positions, public policy parameters, and voting probabilities is made explicit by referring to the logit model of qualitative choice. The analysis is set in an overlapping generations framework. Optimal state pension policies are characterized, relating such diverse factors as population aging, political power distribution, social solidarity, and income taxation.
Creation-Date: revised: July 1990 
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