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When the State Mirrors the Family: The Design of Pension Systems

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  • Vincenzo Galasso
  • Paola Profeta

Abstract

The family is a primal institution, whose internal organization can be transferred to collective institutions, which come to substitute the family in one of its economic roles. We study how the family structure affected the initial design of pension systems. Our theoretical framework predicts that, when pensions systems are introduced in society with weak family ties, they act as a safety net, while in societies with strong ties pensions they replicate the tight link between generations and tend to provide generous benefits. Using Todd (1983) historical classification of family ties, we show that in societies dominated by absolute nuclear families, i.e. weak family ties (f.i. Anglo-Saxon countries), pension systems emerged as a safety net; and viceversa in societies dominated by strong families. Yet, historical family types are not correlated with the size of the pension systems, which have largely changed over time. These results are robust to controlling for alternative explanations, such as legal origin, religion, urbanization and democratization, electoral rules and forms of government. Moreover, evidence on individual data confirm the cross-country results: individuals whose ancestors came to the US from countries featuring communitarian or egalitarian nuclear families prefer to rely on the government as a provider of old age security through generous retirement benefits.

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Bibliographic Info

Paper provided by IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University in its series Working Papers with number 392.

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Date of creation: 2011
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Handle: RePEc:igi:igierp:392

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  1. Cutler, David & Johnson, Richard, 2004. "The Birth and Growth of the Social Insurance State: Explaining Old-Age and Medical Insurance Across Countries," Scholarly Articles 2643658, Harvard University Department of Economics.
  2. GALASSO, Vincenzo & PROFETA, Paola, 2003. "Lessons for an aging society: the political sustainability of social security systems," CORE Discussion Papers 2003077, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Gilles Duranton & Andrés Rodríguez-Pose & Richard Sandall, 2008. "Family types and the persistence of regional disparities in Europe," Working Papers 2008-07, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales.
  4. David M. Cutler & Richard Johnson, 2001. "The birth and growth of the social-insurance state : explaining old-age and medical insurance across countries," Research Working Paper RWP 01-13, Federal Reserve Bank of Kansas City.
  5. Alberto Alesina & Paola Giuliano, 2010. "The power of the family," Journal of Economic Growth, Springer, vol. 15(2), pages 93-125, June.
  6. repec:crr:crrwps:2004-07 is not listed on IDEAS
  7. Elizabeth Caucutt & Thomas Cooley & Nezih Guner, 2013. "The farm, the city, and the emergence of social security," Journal of Economic Growth, Springer, vol. 18(1), pages 1-32, March.
  8. Alesina, Alberto & Algan, Yann & Cahuc, Pierre & Giuliano, Paola, 2010. "Family Values and the Regulation of Labor," IZA Discussion Papers 4747, Institute for the Study of Labor (IZA).
  9. Vincenzo Galasso & Roberta Gatti & Paola Profeta, 2009. "Investing for the old age: pensions, children and savings," International Tax and Public Finance, Springer, vol. 16(4), pages 538-559, August.
  10. Disney, Richard, 2007. "Population ageing and the size of the welfare state: Is there a puzzle to explain?," European Journal of Political Economy, Elsevier, vol. 23(2), pages 542-553, June.
  11. J. Ignacio Conde-Ruiz & Paola Profeta, 2007. "The Redistributive Design of Social Security Systems," Economic Journal, Royal Economic Society, vol. 117(520), pages 686-712, 04.
  12. Vincenzo Galasso, 2006. "The Political Future of Social Security in Aging Societies," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262072734, December.
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  14. Fernández, Raquel & Fogli, Alessandra, 2005. "Culture: An Empirical Investigation of Beliefs, Work and Fertility," CEPR Discussion Papers 5089, C.E.P.R. Discussion Papers.
  15. Koethenbuerger, Marko & Poutvaara, Panu & Profeta, Paola, 2008. "Why are more redistributive social security systems smaller? A median voter approach," Munich Reprints in Economics 19459, University of Munich, Department of Economics.
  16. Amir N. Licht & Chanan Goldschmidt & Shalom H. Schwartz, 2003. "Culture Rules: The Foundations of the Rule of Law and Other Norms of Governance," William Davidson Institute Working Papers Series 2003-605, William Davidson Institute at the University of Michigan.
  17. Pinotti Paolo, 2009. "Financial Development and Pay-As-You-Go Social Security," The B.E. Journal of Macroeconomics, De Gruyter, vol. 9(1), pages 1-21, March.
  18. Lindert Peter H., 1994. "The Rise of Social Spending, 1880-1930," Explorations in Economic History, Elsevier, vol. 31(1), pages 1-37, January.
  19. Tim Krieger & Stefan Traub, 2008. "Back to Bismarck? Shifting Preferences for Intragenerational Redistribution in OECD Pension Systems," Working Papers CIE 13, University of Paderborn, CIE Center for International Economics.
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Cited by:
  1. Barnett, Richard C. & Bhattacharya, Joydeep & Puhakka, Mikko, 2012. "Private versus public old-age security," Staff General Research Papers 35442, Iowa State University, Department of Economics.
  2. Alesina, Alberto F & Giuliano, Paola, 2013. "Family Ties," CEPR Discussion Papers 9483, C.E.P.R. Discussion Papers.
  3. Luca Crivelli & Paola Salari, 2012. "Fiscal federalism and income redistribution through healthcare financing: An empirical analysis for the Swiss cantons," CEPRA working paper 1204, USI Università della Svizzera italiana.
  4. Bertocchi, Graziella & Bozzano, Monica, 2013. "Women, Medieval Commerce, and the Education Gender Gap," IZA Discussion Papers 7224, Institute for the Study of Labor (IZA).
  5. Alberto Alesina & Paola Giuliano, 2013. "Culture and Institutions," NBER Working Papers 19750, National Bureau of Economic Research, Inc.
  6. repec:mod:depeco:0007 is not listed on IDEAS
  7. Vincenzo Galasso & Paola Profeta, 2013. "From Family Culture to Welfare State Design," CHILD Working Papers Series 14, Centre for Household, Income, Labour and Demographic Economics (CHILD) - CCA.
  8. Graziella Bertocchi & Monica Bozzano, 2013. "Family Structure and the Education Gender Gap: Evidence from Italian Provinces," CESifo Working Paper Series 4460, CESifo Group Munich.

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