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Abstract
What economic forces create and sustain old-age Social Security as a public program? We relate political, efficiency, and narrative theories of Social Security to empirical results reported in our companion paper in this volume. Political theories, including rational majority voting and pressure group theories, feature a redistributive struggle among groups. "Efficiency theories," which model SS as a full or partial solution to market failure, include optimal redistribution, retirement insurance, and alleviating labor market congestion. Finally we analyze three "narrative" theories.
Overall, retirement, and not alleviating poverty, seems important at the margin, which means that plans to reduce intergenerational redistribution may not be politically sustainable merely because they provide "adequate" incomes for the elderly. Politics seem important, because cross-cohort redistribution is so prevalent, even when the old are consuming as much or more than do the young. SS reform would therefore be assisted by political reforms equalizing political power across generations.

Abstract
What does the international history of old-age Social Security program design say about the forces creating and sustaining it as a public program? First, because many program features are internationally common, and/or explained by country characteristics, SS may emerge and grow due to systematic political and economic forces. Second, some observations suggest that political forces are important: (a) SS redistributes from young to old, even when the elderly consume as much or more than do the young, and (b) benefits increase with lifetime earnings and are hardly means-tested. On the other hand, it is not simply a matter of the elderly out-voting the young, because: (c) benefit formulas induce retirement, especially in the countries with the largest SS budgets, and (d) similar public pension programs emerge and grow under very different political regimes. We explain how empirical observations, and some currently unanswered empirical questions, relate to various public pension theories.

The dismal growth performance of Africa is the worst economic tragedy of the XXth century. We document the evolution of per capita GDP for the continent as a whole and for subset of countries south of the Sahara desert. We document the worsening of various income inequality indexes and we estimate poverty rates and headcounts. We then analyze some of the central robust determinants of economic growth reported by Sala-i-Martin, Doppelhofer and Miller (2003) and project the annual growth rates Africa would have enjoyed if these key determinants had taken OECD rather than African values. Expensive investment goods, low levels of education, poor health, adverse geography, closed economies, too much public expenditure and too many military conflicts are seen as key explanations of the economic tragedy.

We propose a positive theory that is consistent with two important features of social security programs around the world: (1) they redistribute income from young to old and (2) they induce retirement. We construct a voting model that includes a "political campaign" or "debate" prior to the election. The model incorporates "single-mindedness" of the groups that do not work: while the workers divide their political capital between their "age concerns" and "occupational concerns", the retired concentrate all their political capital to support their age group. In our model, the elderly end up getting transfers from the government (paid by the young) and distortionary labor income taxes induce the retirement of the elderly. In addition, our model predicts that occupational groups that work more will tend to have more political power. The opposite is true for non-occupational groups (such as the elderly). We provide some evidence that supports these additional predictions.

This paper analyses the economic growth performance in the Arab world over the last forty years. The Arab world has managed to reduce poverty performance despite its relatively disappointing growth performance. We relate this poor performance of both oil and non-oil producers to investment. Contrary to widespread belief, we do not find evidence that low quantity of investment is the main of low growth. The decline in the investment rate followed rather than preceded the reduction in the aggregate growth rate. We conclude that the low quality of investment projects is the key determinant of growth. The excessive reliance on public investment, the low quality of financial institutions, the bad business environment (due to political and social instability and to excessive public intervention and overregulation) and the low quality of human capital are important determinants of systematically unproductive investment decisions and, thus, low economic growth.

166 countries have some kind of public old age pension. What economic forces create and sustain old-age Social Security as a public program? In the first part of the paper, we document some of the internationally and historically common features of Social Security programs including explicit and implicit taxes on labor supply, pay-as-you-go features, intergenerational redistribution, benefits which are increasing functions of lifetime earnings and not means-tested. The rest of the paper discusses various positive theories of Social Security and compares each of them with the empirical regularities uncovered in the first part. We partition theories into three groups: "political", "efficiency" and "narrative" theories. We explore three political theories: the majority rational voting model (with its two versions: "the elderly as the leaders of a winning coalition with the poor" and the "once and for all election" model), the "time-intensive model of political competition" and the "taxpayer protection model". We then discuss the "efficiency theories," which view creation of the SS program as a full or partial solution to some market failure. Efficiency explanations of social security include the "SS as welfare for the elderly", the "retirement increases productivity to optimally manage human capital externalities", "optimal retirement insurance", "labor market congestion," the "prodigal father problem", the "misguided Keynesian", the "optimal longevity insurance", the "government economizing transaction costs", and the "return on human capital investment" theory. Finally we analyze three "narrative" theories of social security: the "chain letter theory", the "monopoly capitalism theory", and the "Sub-but-Nearly-Optimal policy response to private pensions theory". The political and efficiency explanations are compared with the international and historical facts and used to derive implications for replacing the typical pay-as-you-go system with a forced savings plan. Most of the explanations suggest that forced savings does not increase welfare. In fact, it may decrease it.