| This dissertation analyzes the interaction between political institutions, intergenerational redistribution policies and demographic transitions.; The first part studies the impact of two voting structures on sustainable fiscal policies. Intergenerational transfers are outcomes of a social security game among selfish median voters. Elections are held every period.; Simple majoritarian systems sustain a large set of subgame perfect equilibrium transfers, including dynamically inefficient, stationary and non stationary ones (fluctuating, cyclical, chaotic), through history-dependent trigger strategies.; To restrict the set of equilibrium allocations, I depart from the existing literature and investigate constitutional "rules" that give minority veto power over fiscal policy changes proposed by the majority. This unanimity provision eliminates all fluctuating and all dynamically inefficient transfers, reducing the equilibrium set to weakly increasing transfer sequences that converge to the golden rule.; In the second part, a 67-period life cycle simulation model is used to study the social security system's policy response, as decided by the majority of the voters under a constitutional "rule" system, to the U.S. demographic changes from 1964 to 1992. A social security system is defined to be politically sustainable if the majority agrees to continue, or increase, the tax rate level inherited from the previous generations, and no veto is posed by the retirees.; The positive level of social security transfer obtained from the simulation is mainly due to two elements: (i) for the majority of the voters, in a forward looking analysis, the social security system represents a profitable investment, if compared to private pension funds; and (ii) the introduction of the system creates general equilibrium effects, as it crowds out capital, thus decreasing wages and increasing returns from capital. In this simulation the combination of these effects is welfare enhancing for the median voter.; The maximum sustainable tax rate is calculated for all presidential election years. I conclude that the existing social security system has been politically sustainable. However, the margin of sustainability has been shrinking as the actual old age survival insurance tax rates have been increasing, from 6.75% to 11.2%, and the maximum tax rate has been decreasing, from 20% to 16.8%. |
