Public Education and Social Security: A Political Economy Approach

This paper develops an overlapping-generations model with uncertain lifetimes and altruism towards children. The paper characterizes a Markov perfect political equilibrium of voting over two conflicting policy issues, public education for the young and social security for the elderly. The model derives multiple indeterminate political equilibria and demonstrates that the difference between the two equilibria in terms of policies and lifetime utility depends on longevity. In particular, the model prediction with respect to the differences in policies and longevity is consistent with the empirical evidence in developed countries.