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 explanation to modern 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 require) than those groups which dissipate their mindedness on several issues. Governments are considered as voting-maximizer policymakers, whose unique goal is winning elections. Using an OLG model and a probabilistic voting approach, I will analyse a society divided into two groups, the old and the young, which only dier for their preferences for leisure. I will show that, in order to win elections, the Government sets the optimal policy vector taking into account preferences for leisure of both groups; eventually, the old obtain a lower eective marginal tax rate and retire earlier, so that they can spend all their time in leisure, a fraction of which is used to undertake political activities whose aim is the capture of politicians.

• Item Type: MPRA Paper
• Language: English
• Keywords: probabilistic voting model; single-mindedness; social security systems
• Subjects: H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H21 - Efficiency ; Optimal Taxation; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J26 - Retirement ; Retirement Policies; J - Labor and Demographic Economics > J1 - Demographic Economics > J18 - Public Policy; D - Microeconomics > D7 - Analysis of Collective Decision-Making > D72 - Political Processes: Rent-Seeking, Lobbying, Elections, Legislatures, and Voting Behavior; H - Public Economics > H5 - National Government Expenditures and Related Policies > H55 - Social Security and Public Pensions; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H23 - Externalities ; Redistributive Effects ; Environmental Taxes and Subsidies; D - Microeconomics > D6 - Welfare Economics > D64 - Altruism ; Philanthropy; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H24 - Personal Income and Other Nonbusiness Taxes and Subsidies; D - Microeconomics > D7 - Analysis of Collective Decision-Making > D78 - Positive Analysis of Policy Formulation and Implementation; J - Labor and Demographic Economics > J1 - Demographic Economics > J14 - Economics of the Elderly ; Economics of the Handicapped ; Non-Labor Market Discrimination; D - Microeconomics > D3 - Distribution > D31 - Personal Income, Wealth, and Their Distributions; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J22 - Time Allocation and Labor Supply; H - Public Economics > H3 - Fiscal Policies and Behavior of Economic Agents > H31 - Household

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