Beiträge zur Jahrestagung des Vereins für Socialpolitik 2015: Ökonomische Entwicklung - Theorie und Politik - Session: Public Sector Economics and Developing Countries No. E14-V2
Pension schemes that redistribute money to the elderly have seen a remarkable surge in developing countries. To explain this phenomenon we build a political economy model of a Beveridgean pay-as-you-go social security system which incorporates family transfers driven by costs of non-compliance to a social norm. For appropriately chosen weights of a political support function a government will choose to increase pensions if the share of the urban population increases, productivity differentials between urban and rural workers widen, or if the social norm erodes.