Renegotiation of social contracts by majority rule
Anderberg, Dan and Perroni, Carlo (2000) Renegotiation of social contracts by majority rule. Working Paper. Coventry: University of Warwick, Department of Economics. Warwick economic research papers (No.566).
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Official URL: http://www2.warwick.ac.uk/fac/soc/economics/resear...
We consider renegotiation of social earnings insurance arrangements by majority voting in an economy where ex-ante identical individuals make unobservable private investments in education. We show that voting-based renegotiation can result in a higher expected level of investment in comparison to the case where social insurance is determined by an appointed social planner. We also find that, with voting-based renegotioation, the availability of costly ex-post information about private investment can help overcome commitment problems. These findings call into question the practice of using a representative-consumer approach when modelling dynamic policy problems in large economies.
|Item Type:||Working or Discussion Paper (Working Paper)|
|Subjects:||J Political Science > JC Political theory|
|Divisions:||Faculty of Social Sciences > Economics|
|Library of Congress Subject Headings (LCSH):||Social contract, Social security, Distribution (Economic theory), Education -- Economic aspects, Policy sciences|
|Series Name:||Warwick economic research papers|
|Publisher:||University of Warwick, Department of Economics|
|Place of Publication:||Coventry|
|Official Date:||4 August 2000|
|Number of Pages:||29|
|Status:||Not Peer Reviewed|
|Access rights to Published version:||Open Access|
|Funder:||Socialvetenskapliga forskningsrådet (Sweden) (SF)|
|Grant number:||95:0129 (SF)|
Akerlof, G.A. (1980) `A theory of social custom, of which unemployment may be one consequence,' Quarterly Journal of Economics 94, 749-775.
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