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Social security and democracy

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  • Xavier Sala-i-Martin
Abstract
Many political economic theories use and emphasize the process of voting in their explanation of the growth of Social Security, government spending, and other public policies. But is there an empirical connection between democracy and Social Security program size or design? Using some new international data sets to produce both country-panel econometric estimates as well as case studies of South American and southern European countries, we find that Social Security policy varies according to economic and demographic factors, but that very different political histories can result in the same Social Security policy. We find little partial effect of democracy on the size of Social Security budgets, on how those budgets are allocated, or how economic and demographic factors affect Social Security. If there is any observed difference, democracies spend a little less of their GDP on Social Security, grow their budgets a bit more slowly, and cap their payroll tax more often, than do economically and demographically similar nondemocracies. Democracies and nondemocracies are equally likely to have benefit formulas inducing retirement and, conditional on GDP per capita, equally likely to induce retirement with a retirement test vs. an earnings test.

Suggested Citation

  • Xavier Sala-i-Martin, 2002. "Social security and democracy," Economics Working Papers 621, Department of Economics and Business, Universitat Pompeu Fabra.
    • Handle: RePEc:upf:upfgen:621
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    More about this item

    Keywords

    Social Security; democracy; determinants of public spending;
    All these keywords.

    JEL classification:

    • H0 - Public Economics - - General
    • H1 - Public Economics - - Structure and Scope of Government
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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