Voting Over Social Security with Uncertain Lifetimes

Abstract

A pension scheme, even if designed primarily to shift income between the working life and retirement period of individuals, is also an instrument for the redistribution of lifetime income among individuals. Discussions of pensions have often paid little attention to the question of intra-generational redistribution to focus on the issues of efficiency and inter-generational redistribution. This largely neglected aspect of social security is all the more important when political considerations are thrown in. The existing literature on the politics of inter-generational transfers shares this idea that the working majority agrees to pay the pensions of the retired population, on the understanding that they will get equivalent or higher transfers from the next working generation¹. While this may sound comforting, there is no real assurance that a scheme operated by one generation will be acceptable to subsequent generations, unless they involve a substantial amount of intra-generational redistribution (see Tabellini, 1991). In short, inter-generational transfers need intra-generational redistribution to be politically viable.