The Political Economy of Redistributive Social Security

December 1, 1999

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Format: Chicago

Pierre Pestieau. The Political Economy of Redistributive Social Security, (USA: International Monetary Fund, 1999) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Population aging puts significant pressure on social security systems that are based mainly on a pay-as-you-go (PAYG) formula and determined by the political process in which both retirees and future retirees participate. This paper demonstrates that in an economic and demographic steady state, majoritarian democracy overspends on social security. It then shows that in case of demographic shock, the regular majority process can be paralyzed by the development of entrenched interest groups that could lose from majority decisions. Depending on the way these entrenched interests operate, they can be judged more or less desirable from the viewpoint of social justice.

Subject: Aging, Financial institutions, Labor, Pensions, Population and demographics, Retirement, Securities, Wages

Keywords: Aging, Benefit rule, Entitlements, Europe, Lt worker, Majority voting, Pensions, Replacement ratio, Replacement ratio retiree, Retirement, Securities, Simple majority, Social security, Tax rate, Wages, Workers vote, WP

Publication Details

Pages:

22
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1999/180
Stock No:

WPIEA1801999
ISBN:

9781451859096
ISSN:

1018-5941

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