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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. Alesina, Alberto & Giuliano, Paola, 2007. "The Power of the Family," IZA Discussion Papers 2750, Institute for the Study of Labor (IZA).
  2. Elizabeth M. Caucutt & Thomas F. Cooley & Nezih Guner, 2007. "The Farm, the City, and the Emergence of Social Security," NBER Working Papers 12854, National Bureau of Economic Research, Inc.
  3. Koethenbuerger, Marko & Poutvaara, Panu & Profeta, Paola, 2005. "Why Are More Redistributive Social Security Systems Smaller? A Median Voter Approach," IZA Discussion Papers 1831, Institute for the Study of Labor (IZA).
  4. Fernández, Raquel & Fogli, Alessandra, 2005. "Culture: An Empirical Investigation of Beliefs, Work and Fertility," CEPR Discussion Papers 5089, C.E.P.R. Discussion Papers.
  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, 2008. "The Political Future of Social Security in Aging Societies," MIT Press Books, The MIT Press, edition 1, volume 1, number 026257246x, December.
  7. Gilles Duranton & Andrés Rodríguez-Pose & Richard Sandall, 2008. "Family Types and the Persistence of Regional Disparities in Europe," SERC Discussion Papers 0009, Spatial Economics Research Centre, LSE.
  8. 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.
  9. repec:crr:crrwps:2004-07 is not listed on IDEAS
  10. J. Ignacio Conde-Ruiz & Paola Profeta, 2007. "The Redistributive Design of Social Security Systems," Working Papers 2007-07, FEDEA.
  11. Lindert Peter H., 1994. "The Rise of Social Spending, 1880-1930," Explorations in Economic History, Elsevier, vol. 31(1), pages 1-37, January.
  12. Alberto Alesina & Yann Algan & Pierre Cahuc & Paola Giuliano, UCLA, 2010. "Family Values and the Regulation of Labor," Working Papers 2010.56, Fondazione Eni Enrico Mattei.
  13. David M. Cutler & Richard Johnson, 2004. "The Birth and Growth of the Social Insurance State: Explaining Old Age and Medical Insurance Across Countries," Public Choice, Springer, vol. 120(1_2), pages 87-121, 07.
  14. Pinotti Paolo, 2009. "Financial Development and Pay-As-You-Go Social Security," The B.E. Journal of Macroeconomics, De Gruyter, De Gruyter, vol. 9(1), pages 1-21, March.
  15. 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.
  16. repec:pdn:wpaper:13 is not listed on IDEAS
  17. Vincenzo Galasso & Paola Profeta, 2004. "Lessons for an ageing society: the political sustainability of social security systems," Economic Policy, CEPR;CES;MSH, CEPR;CES;MSH, vol. 19(38), pages 63-115, 04.
  18. 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.
  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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Citations

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Cited by:
  1. Alberto Alesina & Paola Giuliano, 2013. "Culture and Institutions," NBER Working Papers 19750, National Bureau of Economic Research, Inc.
  2. 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.
  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. 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).
  5. repec:mod:depeco:0007 is not listed on IDEAS
  6. Alesina, Alberto F & Giuliano, Paola, 2013. "Family Ties," CEPR Discussion Papers 9483, C.E.P.R. Discussion Papers.
  7. Vincenzo Galasso & Paola Profeta, 2013. "From Family Culture to Welfare State Design," CHILD Working Papers Series, Centre for Household, Income, Labour and Demographic Economics (CHILD) - CCA 14, Centre for Household, Income, Labour and Demographic Economics (CHILD) - CCA.
  8. Luca Crivelli & Paola Salari, 2012. "Fiscal federalism and income redistribution through healthcare financing: An empirical analysis for the Swiss cantons," CEPRA working paper, USI Università della Svizzera italiana 1204, USI Università della Svizzera italiana.

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