Open AccessThe Redistributive Design of Social Security Systems *
Author(s) -
Ignacio CondeRuiz J.,
Profeta Paola
Publication year - 2007
Publication title -
the economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 4.683
H-Index - 160
eISSN - 1468-0297
pISSN - 0013-0133
DOI - 10.1111/j.1468-0297.2007.02046.x
Subject(s) - social security , redistribution (election) , economics , pension , redistribution of income and wealth , voting , majority rule , economic inequality , labour economics , inequality , transfer payment , public good , microeconomics , welfare , market economy , finance , mathematical analysis , mathematics , artificial intelligence , politics , political science , computer science , law
Countries with low intragenerational redistribution in social security systems (Bismarckian) are associated with larger public pension expenditures, a smaller fraction of private pension and lower income inequality than countries with more redistributive social security (Beveridgean). This article introduces a bidimensional voting model to account for these features. Agents different in age, income and in their ability to invest in the capital market vote on the degree of redistribution of the social security system and on the size of the transfer. In an economy with three income groups, a small Beveridgean system is supported by low‐income agents, who gain from its redistributive feature, and high‐income individuals, who seek to minimise their tax contribution and to invest in a private scheme. Middle‐income individuals instead favour a large Bismarckian system.