TY  - RPRT
Y1  - 2015/07//
A1  - Wen, Xue
UR  - http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2697985
KW  - Keywords: Myopia
KW  -  Social Security
KW  -  Probabilistic Voting. JEL Codes: H55
KW  -  D91
KW  -  H30
N2  - This paper investigates the political incentives for the design of a Pay-as-you-go public pension system in a probabilistic voting model with both far-sighted and myopic agents. People vote for a payroll tax rate determining the size of the pension system and a Bismarckian factor representing the redistributive degree of the system. The pension system acts as a redistribution mechanism and a commitment device. The far-sighted households prefer a contributive social security system. The myopic households prefer a more redistributive pension system but not necessarily a more generous pension system due to the trade-off between redistribution and efficiency. Office seeking politicians can target the far-sighted and myopic groups by leveraging the generosity and the redistribution degree of the social security system. In the political equilibrium, the payroll tax rate is U-shaped with respect to the Bismarckian factor, which can partially explain the political puzzle that why, in practice, Bismarckian pension systems tend to be associated with a larger pension base.
AV  - none
M1  - working_paper
ID  - eprints2950
TI  - A Probabilistic Voting Model of Social Security with Myopic Agents
ER  -