Several authors have argued that a mandatory social security program undertaken by Social Planner can have positive effects on welfare when individuals possess hidden information about their longevity. Davies and Kuhn (1992) have considered the related problem of the effects of a mandatory social security program undertaken by Social Planner when individuals can take hidden actions to affect their longevity and they have shown that social security never raises welfare in a pure moral hazard economy. Anderberg (1999) has considered voting over a mandatory social security program when there is an annuity market characterized by adverse selection and he has shown that a majority voting can be either the median type's ideal policy or an ends-against-the-middle equilibrium. In this work I will consider the case in which the annuity market is characterized by both adverse selection and moral hazard and I will analyse the effect of a mandatory social security program undertaken by Social Planner and by individuals through a Majority Rule: a mandatory social security program can have positive effects on welfare.
|Number of pages||36|
|Publication status||Published - 2004|
- Asymmetric and Private Information
- Majority Voting
- Social Security