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

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  • Vincenzo Galasso

    (CEPRA, Institute of Economics, Universita' della Svizzera Italiana)

  • Paola Profeta

    ()
    (Econpubblica, Bocconi University, Milan)

Abstract

We study how the prevailing internal organization of the family affected the initial design of pension systems. Our theoretical framework predicts that, in society with weak family ties, pensions systems were introduced to act as a safety net, while in societies with strong ties they replicate the tight link between generations by providing generous benefits. Using a historical classification of family ties, we show that in societies dominated by (weak ties) absolute nuclear families (f.i. Anglo-Saxon countries), safety net pension systems emerged; and viceversa in societies dominated by strong families. These results are robust to controlling for alternative legal, religious, and political explanations. Evidence on individual data confirm these findings: US citizens whose ancestors came from countries featuring strong ties (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 USI Università della Svizzera italiana in its series CEPRA working paper with number 1201.

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Length: 57 pages
Date of creation: Jan 2012
Date of revision:
Handle: RePEc:lug:wcepra:1201

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Web page: https://www.bul.sbu.usi.ch

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Keywords: culture; family ties; pension design;

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References

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  1. Thomas F. Cooley & Elizabeth M. Caucutt & Nezih Guner, 2006. "The Farm, the City, and the Emergence of Social Security," Working Papers 06-21, New York University, Leonard N. Stern School of Business, Department of Economics.
  2. Vincenzo Galasso, 2008. "The Political Future of Social Security in Aging Societies," MIT Press Books, The MIT Press, edition 1, volume 1, number 026257246x, December.
  3. J. Ignacio Conde-Ruiz & Paola Profeta, 2007. "The Redistributive Design of Social Security Systems," Working Papers 2007-07, FEDEA.
  4. Alesina, Alberto & Giuliano, Paola, 2007. "The Power of the Family," IZA Discussion Papers 2750, Institute for the Study of Labor (IZA).
  5. 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.
  6. Vincenzo Galasso & Paola Profeta, 2004. "Lessons for an ageing society: the political sustainability of social security systems," Economic Policy, CEPR & CES & MSH, vol. 19(38), pages 63-115, 04.
  7. Gilles Duranton & Andrés Rodríguez-Pose & Richard Sandall, 2007. "Family Types and the Persistence of Regional Disparities in Europe," Bruges European Economic Research Papers 10, European Economic Studies Department, College of Europe.
  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. Galasso, Vincenzo & Gatti, Roberta & Profeta, Paola, 2008. "Investing for the old age : pensions, children and savings," Social Protection Discussion Papers 47101, The World Bank.
  10. repec:crr:crrwps:2004-07 is not listed on IDEAS
  11. Fernández, Raquel & Fogli, Alessandra, 2005. "Culture: An Empirical Investigation of Beliefs, Work and Fertility," CEPR Discussion Papers 5089, C.E.P.R. Discussion Papers.
  12. repec:pdn:wpaper:13 is not listed on IDEAS
  13. 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.
  14. Lindert Peter H., 1994. "The Rise of Social Spending, 1880-1930," Explorations in Economic History, Elsevier, vol. 31(1), pages 1-37, January.
  15. Marko Koethenbuerger & Panu Poutvaara & Paola Profeta, 2008. "Why are more redistributive social security systems smaller? A median voter approach," Oxford Economic Papers, Oxford University Press, vol. 60(2), pages 275-292, April.
  16. 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.
  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. 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.
  19. 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.
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Citations

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Cited by:
  1. Alesina, Alberto & Giuliano, Paola, 2014. "Family Ties," Handbook of Economic Growth, in: Handbook of Economic Growth, edition 1, volume 2, chapter 4, pages 177-215 Elsevier.
  2. 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.
  3. Bertocchi, Graziella & Bozzano, Monica, 2013. "Women, Medieval Commerce, and the Education Gender Gap," CEPR Discussion Papers 9359, C.E.P.R. Discussion Papers.
  4. Barnett, Richard & Bhattacharya, Joydeep & Puhakka, Mikko, 2012. "Private Versus Public Old-Age Security," School of Economics Working Paper Series 2012-14, LeBow College of Business, Drexel University.
  5. 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.
  6. repec:mod:depeco:0007 is not listed on IDEAS
  7. Bertocchi, Graziella & Bozzano, Monica, 2014. "Family Structure and the Education Gender Gap: Evidence from Italian Provinces," IZA Discussion Papers 8347, Institute for the Study of Labor (IZA).
  8. Alberto Alesina & Paola Giuliano, 2013. "Culture and Institutions," NBER Working Papers 19750, National Bureau of Economic Research, Inc.

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