Demographics, political agenda and public budget

In ageing societies, the growing number of elderly citizens is expected to bias the allocation of public resources in their favour, as office-seeking politicians respond to electoral incentives. Yet, such a tendency is scarcely observable in the data for some European countries. This paper develops a theoretical model of electoral competition between two parties facing an electorate composed of young and old voters. A key feature of the model is that voters belonging to different generations, despite having conflicting preferences over the provision of public goods, are linked by family ties that generate altruistic preferences and intra-family transfers. We show that party platforms tend to accommodate the preferences of the demographically dominant group. However, this effect weakens as altruism becomes more widespread, offering a mechanism to reconcile the empirical evidence with theoretical expectations.