Abstract
Departing from the dominant approach of the book, this chapter presents the simplest models of political economy. Under suitable assumption, here the median voter rather than the benevolent government determines the tax or the contribution rate. Section 12.2 concentrates on voting on taxes. Section 12.3 extends the results to voting on pensions, and tries to salvage a very simple but misleading model. Two counterintuitive assumptions are replaced as follows: (a) workers do not receive the same benefits as the pensioners, rather they receive a part of it; (b) workers do not neglect future benefits, they count on a positive share of it. Making these trivial generalizations, the absurd result, that the older the population, the smaller the welfare state, is qualified.
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Simonovits, A. (2018). Models of Political Economy. In: Simple Models of Income Redistribution. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-72502-4_12
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DOI: https://doi.org/10.1007/978-3-319-72502-4_12
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