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The B.E. Journal of Economic Analysis & Policy

Editor-in-Chief: Jürges, Hendrik / Ludwig, Sandra

Ed. by Auriol , Emmanuelle / Brunner, Johann / Fleck, Robert / Friebel, Guido / Requate, Till / Tsui, Kevin / Wichardt, Philipp / Zulehner, Christine

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Political and Economic Forces Sustaining Social Security

Casey B Mulligan1 / Xavier Sala-i-Martin2

1University of Chicago,

2Columbia University,

Citation Information: Advances in Economic Analysis & Policy. Volume 4, Issue 1, ISSN (Online) 1538-0637, DOI: 10.2202/1538-0637.1289, May 2004

Publication History:
Published Online:
2004-05-03

Abstract

What economic forces create and sustain old-age Social Security as a public program? We relate political, efficiency, and narrative theories of Social Security to empirical results reported in our companion paper in this volume. Political theories, including rational majority voting and pressure group theories, feature a redistributive struggle among groups. "Efficiency theories," which model SS as a full or partial solution to market failure, include optimal redistribution, retirement insurance, and alleviating labor market congestion. Finally we analyze three "narrative" theories.

Overall, retirement, and not alleviating poverty, seems important at the margin, which means that plans to reduce intergenerational redistribution may not be politically sustainable merely because they provide "adequate" incomes for the elderly. Politics seem important, because cross-cohort redistribution is so prevalent, even when the old are consuming as much or more than do the young. SS reform would therefore be assisted by political reforms equalizing political power across generations.

Keywords: Social Security; Pensions; Elderly; Retirement; Political Economics

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