Skip to main content
SpringerLink
Log in

Productivity Growth and the Political Economy of Social Security

  • Published:
Public Choice Aims and scope Submit manuscript

Abstract

The present paper provides an analysis of unfunded social securityas the outcome of a public decision making process in an endogenousgrowth economy. It employs a model in which there is a non-monotonic relationship beween productivity growth and the scale ofpublic intergenerational redistribution. The paper shows thatalthough unfunded social security need not harm growth in general,it is likely to harm growth in a democracy. This effect isreinforced by population aging.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • Aaron, H.J. (1966). The social insurance paradox. Canadian Journal of Economics and Political Science 32: 371-376.

    Google Scholar 

  • Abel, A.B., Mankiw, N.G., Summers, L.H. and Zeckhauser, R.J. (1989). Assessing dynamic inefficiency: Theory and evidence. Review of Economic Studies 56: 1-20.

    Google Scholar 

  • Arrow, K.J. (1962). The economic implication of learning by doing. Review of Economic Studies 29: 155-173.

    Google Scholar 

  • Becker, G.S. and Barro, R.J. (1988). A reformulation of the economic theory of fertility. Quarterly Journal of Economics 103: 1-25.

    Google Scholar 

  • Boadway, R.W. and Wildasin, D.E. (1989). A median voter model of social security. International Economic Review 30: 307-328.

    Google Scholar 

  • Breyer, F. (1994). The political economy of intergenerational redistribution. European Journal of Political Economy 10: 61-84.

    Google Scholar 

  • Browning, E.K. (1975). Why the social insurance budget is too large in a democracy. Economic Inquiry 16: 373-388.

    Google Scholar 

  • Cabellero, R. and Lyons, R. (1990). Internal versus external economies in European industry. European Economic Review 34: 805-826.

    Google Scholar 

  • Carmichael, J. (1982). On Barro's theorem of debt neutrality: The irrelevance of net wealth. American Economic Review 72: 202-213.

    Google Scholar 

  • Cigno, R. and Rosati, F.C. (1996). Jointly determined saving and fertility behavior: Theory, and estimates for Germany, Italy, UK and USA. European Economic Review 40: 1561-1589.

    Google Scholar 

  • Diamond, P. (1965). National debt in a neoclassical growth model. American Economic Review 55: 1126-1150.

    Google Scholar 

  • Downs, A. (1957). An economic theory of democracy. New York: Harper & Brothers Publishers.

    Google Scholar 

  • Ehrlich, I. and Lui, F.T. (1991). Intergenerational trade, longevity, and economic growth. Journal of Political Economy 99: 1029-1059.

    Google Scholar 

  • Grossman, G.G. and Yanagawa, N. (1993). Asset bubbles and endogenous growth. Journal of Monetary Economics 31: 3-19.

    Google Scholar 

  • Hansson, I. and Stuart, C. (1989). Social security as trade among living generations. American Economic Review 79: 1182-1195.

    Google Scholar 

  • Jones, L.E. and Manuelli, R.E. (1992). Finite lifetimes and growth. Journal of Economic Theory 58: 171-197.

    Google Scholar 

  • Kimball, M.S. (1987). Making sense of two-sided altruism. Journal of Monetary Economics 20: 301-326.

    Google Scholar 

  • King, I. and Ferguson, D. (1993). Dynamic inefficiency, endogenous growth, and Ponzi games. Journal of Monetary Economics 32: 79-104.

    Google Scholar 

  • Romer, P.M. (1986). Increasing returns and long-run growth. Journal of Political Economy 94: 1002-1037.

    Google Scholar 

  • Romer, P.M. (1989). Capital accumulation in the theory of long-run growth. In R. Barro (Ed.), Business cycle theory. Cambridge, MA: Harvard University Press.

    Google Scholar 

  • Saint-Paul, G. (1992). Fiscal policy in an endogenous growth model. Quarterly Journal of Economics 106: 1243-1259.

    Google Scholar 

  • Samuelson, P.A. (1958). An exact consumption-loan model of interest with or without the social contrivance of money. Journal of Political Economy 66: 467-482.

    Google Scholar 

  • Townley, O.G.C. (1981). Public choice and the social insurance paradox: A note. Canadian Journal of Economics 14: 712-717.

    Google Scholar 

  • Verbon, H.A.A. (1987). The rise and evolution of public pension systems. Public Choice 52: 75-100.

    Google Scholar 

  • Verbon, H.A.A. and Verhoeven, M.J.M. (1992). Decision making on pension schemes under rational expectations. Journal of Economics 56: 71-97.

    Google Scholar 

  • Weizsäcker, R.K. von (1990). Population aging and social security: A politico-economic model of state pension financing. Public Finance 45: 491-509.

    Google Scholar 

  • Wigger, B.U. (1998). Pay-as-you-go financed public pensions in a model of endogenous growth and fertility.Journal of Population Economics, forthcoming.

  • Zhang, Jic. (1995). Social security and endogenous growth. Journal of Public Economics 58: 185-213.

    Google Scholar 

  • Zhang, Junxi. (1995). Does unfunded social security also depress output growth? Economic Letters 49: 307-312.

    Google Scholar 

  • Zhang, Junsen and Nishimura, K. (1993). The old-age security hypothesis revisited. Journal of Development Economics 41: 191-202.

    Google Scholar 

  • Zhang, Junsen and Zhang, Junxi. (1995). The effects of social security on population and output growth. Southern Economic Journal 62: 440-450.

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Department of Economics, University of Mannheim, D-68131, Mannheim, Germany

    Berthold U. Wigger

Authors
  1. Berthold U. Wigger
    View author publications

    You can also search for this author in PubMed Google Scholar

Rights and permissions

Reprints and permissions

About this article

Cite this article

Wigger, B.U. Productivity Growth and the Political Economy of Social Security. Public Choice 106, 53–76 (2001). https://doi.org/10.1023/A:1005118601448

Download citation

  • Issue Date:

  • DOI: https://doi.org/10.1023/A:1005118601448

Keywords

Search

Navigation