Thursday, December 23, 2004
Assaf Razin (Tel Aviv University) & Efraim Sadka (Tel Aviv University) have posted Aging and the Welfare State: The Role of Young and Old Voting Pivots on the NBER web site. Here is the abstract:
An income tax is generally levied on both capital and labor income. The working young bears mostly the burden of the tax on labor income, whereas the retired old, who already acummulated her savings, bears the brunt of the capital income tax. Therefore, there arise two types of conflict in the determination of the income tax: the standard intragenerational conflict between the poor and the rich, and an intergenerational conflict between the young and the old. The paper studies how aging affects the resolution of these conflicts, and the politico-economic forces that are at play: the changes in the voting pivots and the fiscal leakage from tax payers to transfer recipients.