Political models

So far, we have not modeled the political issues raised by pension systems. (Chapter 12 was only a naive attempt at modeling the interaction between government and the individual, while Appendix A is normative rather than descriptive.) There are plenty of papers on the political issues raised by pension systems and especially by pension reforms. Muller (1999) and Orenstein (2000) provide a rich qualitative analysis in the context of pension reforms in ex-socialist countries. In this chapter we shall sketch a model by Casamatta et al. (2000) on the relationship between democracy and pension systems, but first we outline the median voter model (for a simple introduction, see Stiglitz, 1988, Chapter 6).