The Political Intergenerational Welfare State

Monisankar Bishnu and Min Wang

Staff General Research Papers Archive from Iowa State University, Department of Economics

Abstract: This paper characterizes an intergenerational welfare state with endogenous education and pension choice under general equilibrium-probabilistic voting. We show that politically implementing public education program always increases the future human capital, but this higher future human capital would not help support a more generous social security in the future. The effect of implementing PAYG social security on education however crucially depends on the sources of funding for education investment. Establishing PAYG pension program depresses investment in public education. However if the source of funding for education investment is private, in both the cases when pension is the only instrument or when public pension and public education are implemented together as a package, there can be an improvement in education investment if and only if the political influence of the old is limited and so the size of the PAYG social security is small. A substantially thick pension scheme which results from a heavy influence of the old in the political process spoils the mutual benefits.

Keywords: education; Markov perfect equilibrium; Pension; Probabilistic voting; Endogenous growth (search for similar items in EconPapers)
JEL-codes: D90 E6 H3 H52 H55 (search for similar items in EconPapers)
Date: 2014-08-01
New Economics Papers: this item is included in nep-age, nep-cdm, nep-dge, nep-fdg, nep-mac and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: The political intergenerational welfare state (2017)
Working Paper: The political intergenerational welfare state (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:isu:genres:37764

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