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Crowding out or crowding in? Public and private transfers in Germany
[Substituts ou compléments? Transferts publics et privés en Allemagne]

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  • Anette Reil-Held

    (University of Mannheim)

Abstract

Intergenerational support exchanges are of particular interest in the ageing populations of Europe. This paper investigates the relationship between private and public financial transfers to and from elderly people using data from Germany. First, the determinants of private transfer giving are analysed. We find a positive correlation between the amount of public transfers elderly people receive and the private transfers they give. This mechanism can be interpreted as a detour system, an inefficient backflow of pay-as-you-go financed pensions to the young generation. On the other hand, we find for the much smaller group of elderly people who receive private financial support, that these transfers are negatively correlated with the public transfers they receive. Therefore, the “crowding out” hypothesis cannot be rejected and it is possible that public transfers to older people by the German welfare state may displace private financial support which they would otherwise have received.

Suggested Citation

  • Anette Reil-Held, 2006. "Crowding out or crowding in? Public and private transfers in Germany [Substituts ou compléments? Transferts publics et privés en Allemagne]," European Journal of Population, Springer;European Association for Population Studies, vol. 22(3), pages 263-280, September.
    • Handle: RePEc:spr:eurpop:v:22:y:2006:i:3:d:10.1007_s10680-006-9001-x
    DOI: 10.1007/s10680-006-9001-x
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    2. Schunk, Daniel, 2007. "What determines the saving behavior of German households? : an examination of saving motives and saving decisions," Papers 07-10, Sonderforschungsbreich 504.
    3. Aldieri, Luigi & Fiorillo, Damiano, 2015. "Private monetary transfers and altruism: An empirical investigation on Italian families," Economic Analysis and Policy, Elsevier, vol. 46(C), pages 1-15.
    4. Nikolov, Plamen & Bonci, Matthew, 2020. "Do public program benefits crowd out private transfers in developing countries? A critical review of recent evidence," World Development, Elsevier, vol. 134(C).
    5. Schnitzlein Daniel D. & Wunder Christoph, 2016. "Are We Architects of Our Own Happiness? The Importance of Family Background for Well-Being," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 16(1), pages 125-149, January.
    6. Edwin Fourrier-Nicolai, 2020. "How Family Transfers Crowd-out Social Assistance in Germany," Working Papers halshs-02874852, HAL.
    7. Scodellaro, Claire & Khlat, Myriam & Jusot, Florence, 2012. "Intergenerational financial transfers and health in a national sample from France," Social Science & Medicine, Elsevier, vol. 75(7), pages 1296-1302.
    8. Anna Mironova & Lidia Prokofieva, 2018. "The Involvement Of Russian Households In Intergenerational Transfers 2008-14," HSE Working papers WP BRP 18/PSP/2018, National Research University Higher School of Economics.
    9. Sandra García & Jorge Cuartas, 2017. "With a Little Help from my Friends: the Multiplier Effect of Public Subsidies through Private Support," Documentos de trabajo 17647, Escuela de Gobierno - Universidad de los Andes.
    10. Lai, Mun Sim & Orsuwan, Meechai, 2009. "Examining the Impact of Taiwan's Cash Allowance Program on Private Households," World Development, Elsevier, vol. 37(7), pages 1250-1260, July.
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    12. Lin, Wanchuan & Liu, Yiming & Meng, Juanjuan, 2014. "The crowding-out effect of formal insurance on informal risk sharing: An experimental study," Games and Economic Behavior, Elsevier, vol. 86(C), pages 184-211.

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