Arbeitspapier
Social security systems, human capital, and growth in a small open economy
We consider a small open economy in which the level of public education funding is determined by popular vote. We show that growth can be enhanced by the introduction of pay-as-you-go pensions even if the growth rate of aggregate wages falls short of the interest rate. The reason is that the PAYG system allows future retirees to partially internalize positive externalities of public education due to the positive effect of higher future labor productivity on their pension benefits. The majority support for education funding will be especially strong when the PAYG benefit formula is flat, i.e. progressively redistributive. This means that if a flat benefit PAYG pension system is in place then the economy will achieve the highest growth rate relative to the alternative pension system designs. We argue furthermore that while such PAYG pension system may be opposed by the majority of working individuals due to inferior returns to their pension contributions relative to a funded scheme, it is likely to be politically sustained by the coalition of retirees and lower income workers.
- Sprache
-
Englisch
- Erschienen in
-
Series: CESifo Working Paper ; No. 2488
- Klassifikation
-
Wirtschaft
Micro-Based Behavioral Economics: General‡
Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies
Social Security and Public Pensions
Education: Government Policy
- Thema
-
Pay-as-you-go pensions
social security
public education
growth
majority voting
Sozialstaat
Public Choice
Öffentliche Bildungsausgaben
Gesetzliche Rentenversicherung
Umlageverfahren
Wahlsystem
Wirtschaftswachstum
Kleines-offenes-Land
Theorie
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Kaganovich, Michael
Meier, Volker
- Ereignis
-
Veröffentlichung
- (wer)
-
Center for Economic Studies and ifo Institute (CESifo)
- (wo)
-
Munich
- (wann)
-
2008
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:44 MEZ
Datenpartner
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Objekttyp
- Arbeitspapier
Beteiligte
- Kaganovich, Michael
- Meier, Volker
- Center for Economic Studies and ifo Institute (CESifo)
Entstanden
- 2008
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