Internationally Common Features of Public Old-Age Pensions, and Their Implications for Models of the Public Sector

with Xavier Sala-i-Martin


What does the international history of old-age Social Security program design say about the forces creating and sustaining it as a public program? First, because so many program features are internationally common, and/or explained by country characteristics, SS seems to be an “equilibrium” phenomenon, emerging and growing due to some combination of systematic political and economic forces. Second, some observations suggest that political forces are important, because SS is redistributive, and hardly in the income dimension: (a) SS (obviously) redistributes from young to old, (b) generational redistribution occurs even when the elderly consume as much or more than do the young, and (c) benefits increase with lifetime earnings and are hardly means-tested. On the other hand, maybe economic efficiency partly sustains SS, and it is not simply a matter of the elderly out-voting the young, because: (d) benefit formulas induce retirement, especially in the countries with the largest SS budgets, and (e) similar public pension programs emerge and grow under very different political regimes. Together with a companion theoretical paper, this paper explains how additional international regularities in methods of SS taxation and spending, and some currently unanswered empirical questions, relate to various positive theories of public old-age pensions.

Now published in Advances in Economic Analysis and Policy:

© copyright 1997-2004 by Casey B. Mulligan and Xavier Sala-i-Martin. artin.