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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Abstract

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
Dates:	Date Event 4 August 2000 Published
Number:	No.566
Number of Pages:	29
Status:	Not Peer Reviewed
Access rights to Published version:	Open Access (Creative Commons)
Funder:	Socialvetenskapliga forskningsrådet (Sweden) (SF)
Grant number:	95:0129 (SF)

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