The Single-Mindedness Theory: Micro-foundation and Applications to Social Security Systems

Canegrati, Emanuele (2006): The Single-Mindedness Theory: Micro-foundation and Applications to Social Security Systems.

Abstract

The central purpose of this paper is to introduce a new political economy approach which explains the characteristics of Social Security Systems. This approach is based on the Single-Mindedness Theory (SMT), which assumes that the more single-minded groups are able to exert a greater power of influence on Governments and eventually obtain what they ask. Governments are seen as voting-maximizer policy-makers, whose unique goal is winning elections. Using an OLG model and a probabilistic voting approach, I analyse a society divided into two groups, the old and the young, which only differ for their preferences for leisure. I show that, to win elections, the Government sets the optimal policy vector taking into account the preferences for leisure of both groups; eventually, the young gain a fiscal benefit, whilst the old have such an high marginal tax rate that they prefer to retire and spend all their time in leisure, a fraction of which is used in undertake political activities whose aim is the capture of politicians.

• Item Type: MPRA Paper
• Institution: Università Cattolica del Sacro Cuore
• Language: English
• Keywords: probabilistic voting model; single-mindedness; social security systems
• Subjects: D - Microeconomics > D3 - Distribution > D31 - Personal Income, Wealth, and Their Distributions; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J26 - Retirement ; Retirement Policies; D - Microeconomics > D7 - Analysis of Collective Decision-Making > D72 - Political Processes: Rent-Seeking, Lobbying, Elections, Legislatures, and Voting Behavior; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J22 - Time Allocation and Labor Supply

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