Long-term economic implications of Demeny voting: A theoretical analysis

Abstract

Despite the intense debate over possible correctives to the propensity of contemporary democracies experiencing population aging to favor the elderly, a formal analysis of the long-term economic implications of introducing such correctives is lacking. This paper bridges the gap by modeling intergenerational redistribution policies by the government through a simple overlapping-generations framework with endogenous fertility. An original feature of our model is that the government policy rule is also endogenized because the weight assigned by the government to the well-being of each living cohort in its objective function changes with both the demographic composition of the voting population and the possibility for young adults to exercise their minor children’s voting rights (called Demeny voting). Within this setup, we study the long-term effects of the introduction of Demeny voting on population growth, capital accumulation, output and consumption per capita, and individuals’ lifetime well-being.