During the period from 1880 to 1950 publicly managed retirement security
programs became an important part of the social fabric in most advanced
economies. In this paper we study the social, demographic and economic
origins of social security. We describe aDuring the period from 1880 to 1950 publicly managed retirement security
programs became an important part of the social fabric in most advanced
economies. In this paper we study the social, demographic and economic
origins of social security. We describe a model economy in which
demographics, technology, and social security are linked together. We study
an economy with two locations (sectors), the farm (agricultural) and the city
(industrial). The decision to migrate from rural to urban locations is
endogenous and linked to productivity differences between the two locations
and survival probabilities. Furthermore, the level of social security is
determined by majority voting. We show that a calibrated version of this
economy is consistent with the historical transformation in the United States.
Initially a majority of voters live on the farm and do not want to implement
social security. Once a majority of the voters move to the city, the median
voter prefers a positive social security tax, and social security emerges.[+][-]