A positive theory of the income redistributive focus of social security
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The Department of Economic Science was founded in 1898 to teach economic theory as a truth of industrial life, and was very much concerned with applying economics to business and industry, particularly agriculture. Between 1910 and 1967 it showed the growing influence of other social studies, such as sociology, history, and political science. Today it encompasses the majors of Agricultural Business (preparing for agricultural finance and management), Business Economics, and Economics (for advanced studies in business or economics or for careers in financing, management, insurance, etc).
History
The Department of Economic Science was founded in 1898 under the Division of Industrial Science (later College of Liberal Arts and Sciences); it became co-directed by the Division of Agriculture in 1919. In 1910 it became the Department of Economics and Political Science. In 1913 it became the Department of Applied Economics and Social Science; in 1924 it became the Department of Economics, History, and Sociology; in 1931 it became the Department of Economics and Sociology. In 1967 it became the Department of Economics, and in 2007 it became co-directed by the Colleges of Agriculture and Life Sciences, Liberal Arts and Sciences, and Business.
Dates of Existence
1898–present
Historical Names
- Department of Economic Science (1898–1910)
- Department of Economics and Political Science (1910-1913)
- Department of Applied Economics and Social Science (1913–1924)
- Department of Economics, History and Sociology (1924–1931)
- Department of Economics and Sociology (1931–1967)
Related Units
- College of Agricultural and Life Sciences (parent college)
- College of Liberal Arts and Sciences (parent college)
- College of Business (parent college)
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Abstract
Many countries around the world have large public pension programs. Traditionally, these programs have been used to induce retirement by the elderly in order to free up jobs for the young and to redistribute income across generations. This paper provides an efficiency rationale for the inter-generational income redistribution focus of such programs in a framework which explicitly accounts for the role of the lifecycle as well as search and matching frictions in the labor market. In our model, public pension programs alter the age composition of the labor force by inducing the jobless elderly to retire. By requiring a long history of labor market attachment in order to receive benefits, these programs raise the future value of current employment for the young which serves to redistribute bargaining power, and hence income, from the young to the old. The paper argues that pension programs through their effect on the wage structure, the age distribution of the labor force and firm entry decisions, can improve the operation of the labor market and might therefore be desirable on efficiency grounds alone (abstracting from equity and insurance motives). It shows that a pension program that is funded from within the economy can lead to higher welfare than having no pension program at all.