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VOTING ON SOCIAL SECURITY WHEN LABOR SUPPLY IS ENDOGENOUS †
Author(s) -
Breyer Friedrich
Publication year - 1994
Publication title -
economics and politics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.822
H-Index - 45
eISSN - 1468-0343
pISSN - 0954-1985
DOI - 10.1111/j.1468-0343.1994.tb00091.x
Subject(s) - social security , voting , pension , economics , affect (linguistics) , politics , public economics , lump sum , microeconomics , labour economics , payment , finance , political science , market economy , law , sociology , communication
One of the puzzles in the political economic theory of unfunded pension systems is that middle‐aged voters do not seem to advocate unlimited increases in the level of contributions and benefits if they take this decision to be valid forever. While the previous literature answered this question by pointing at borrowing restrictions, a more convincing explanation rests on the voters’understanding that future social security taxes will adversely affect future labor supply and thus the source from which their own pensions must be financed. This paper analyzes the validity of this explanation for two different types of pension systems, (a) the lump‐sum benefits case, and (b) the case of fairness within cohorts.