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

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  • Vincenzo Galasso
  • Paola Profeta

Abstract

This paper studies the transmission mechanism from family culture to economic institutions, by analyzing the impact of the within family organization on the original design of the public pension systems. We build a simple OLG model with families featuring either weak or strong internal ties. When pensions systems are initially introduced, in society with strong ties they replicate the tight link between generations by providing earnings related benefits; whereas in societies with weak family ties they only act as a safety net. To test this transition mechanism, we consider Todd (1982) historical classification of family types across countries. We find that in societies dominated by absolute nuclear families (i.e., weak family ties), pension systems act as a flat safety net entailing a large within-cohort redistribution, and viceversa in societies characterized by stronger family ties where pension systems are more generous. This link between the type of families and the design of pension systems is robust to testing for alternative explanations, such as legal origin, religion, urbanization and democratization of the country at the time of their introduction. Interestingly, historical family types matter for explaining the design of the pension systems, which represents a persistent feature, but not their size, which have largely changed over time.

Suggested Citation

  • Vincenzo Galasso & Paola Profeta, 2010. "When the State Mirrors the Family: The Design of Pension Systems," CESifo Working Paper Series 3191, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_3191
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    References listed on IDEAS

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    Cited by:

    1. repec:eee:poleco:v:49:y:2017:i:c:p:24-46 is not listed on IDEAS
    2. Bertocchi, Graziella & Bozzano, Monica, 2016. "Women, medieval commerce, and the education gender gap," Journal of Comparative Economics, Elsevier, vol. 44(3), pages 496-521.
    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. 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.
    5. Graziella Bertocchi & Monica Bozzano, 2016. "Origins and implications of family structure across Italian provinces in historical perspective," Department of Economics 0095, University of Modena and Reggio E., Faculty of Economics "Marco Biagi".
    6. repec:eee:jcecon:v:46:y:2018:i:2:p:457-479 is not listed on IDEAS
    7. Graziella Bertocchi & Monica Bozzano, 2015. "Family Structure and the Education Gender Gap: Evidence from Italian Provinces," CESifo Economic Studies, CESifo, vol. 61(1), pages 263-300.
    8. repec:eee:eecrev:v:100:y:2017:i:c:p:236-256 is not listed on IDEAS
    9. 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.
    10. repec:hrv:faseco:34330186 is not listed on IDEAS
    11. Elsayyad, May & Konrad, Kai A., 2012. "Fighting multiple tax havens," Journal of International Economics, Elsevier, vol. 86(2), pages 295-305.
    12. Bozzano, Monica, 2017. "On the historical roots of women's empowerment across Italian provinces: religion or family culture?," European Journal of Political Economy, Elsevier, vol. 49(C), pages 24-46.
    13. A. Alesina & P. Giuliano., 2016. "Culture and Institutions," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 11.
    14. Bertocchi, Graziella & Bozzano, Monica, 2016. "Origins and implications of family structure across Italian provinces in historical perspective," CEPR Discussion Papers 11617, C.E.P.R. Discussion Papers.
    15. Alberto Alesina & Yann Algan & Pierre Cahuc & Paola Giuliano, 2015. "Family Values And The Regulation Of Labor," Journal of the European Economic Association, European Economic Association, vol. 13(4), pages 599-630, August.
    16. 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.
    17. Ang, James B. & Fredriksson, Per G., 2017. "Wheat agriculture and family ties," European Economic Review, Elsevier, vol. 100(C), pages 236-256.
    18. repec:taf:jdevst:v:52:y:2016:i:6:p:813-823 is not listed on IDEAS
    19. repec:mod:depeco:0007 is not listed on IDEAS
    20. Mahsa Akbari & Duman Bahrami-Rad & Erik O. Kimbrough, 2017. "Kinship, Fractionalization and Corruption," Discussion Papers dp17-17, Department of Economics, Simon Fraser University.
    21. repec:spr:jopoec:v:31:y:2018:i:3:d:10.1007_s00148-017-0681-9 is not listed on IDEAS

    More about this item

    Keywords

    culture; institutions; historical evidence;

    JEL classification:

    • H10 - Public Economics - - Structure and Scope of Government - - - General
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • N30 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - General, International, or Comparative
    • Z10 - Other Special Topics - - Cultural Economics - - - General
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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