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

Listed author(s):
  • Galasso, Vincenzo
  • Profeta, Paola

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 (e.g. Anglo-Saxon countries), safety net pension systems emerged; and vice versa 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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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8723.

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Date of creation: Dec 2011
Handle: RePEc:cpr:ceprdp:8723
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  1. repec:crr:crrwps:2004-07 is not listed on IDEAS
  2. 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.
  3. Tim Krieger & Stefan Traub, 2008. "Back to Bismarck? Shifting Preferences for Intragenerational Redistribution in OECD Pension Systems," Working Papers CIE 13, Paderborn University, CIE Center for International Economics.
  4. Alberto Alesina & Paola Giuliano, 2010. "The power of the family," Journal of Economic Growth, Springer, vol. 15(2), pages 93-125, June.
  5. 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.
  6. Alessandra Fogli & Raquel Fernandez, 2009. "Culture: An Empirical Investigation of Beliefs, Work, and Fertility," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(1), pages 146-177, January.
  7. Yann Algan & Pierre Cahuc, 2005. "The Roots of Low European Employment: Family Culture?," NBER Chapters,in: NBER International Seminar on Macroeconomics 2005, pages 65-109 National Bureau of Economic Research, Inc.
  8. 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, 08.
  9. Licht, Amir N. & Goldschmidt, Chanan & Schwartz, Shalom H., 2007. "Culture rules: The foundations of the rule of law and other norms of governance," Journal of Comparative Economics, Elsevier, vol. 35(4), pages 659-688, December.
  10. 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.
  11. 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.
  12. 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.
  13. Vincenzo Galasso & Roberta Gatti & Paola Profeta, 2009. "Investing for the old age: pensions, children and savings," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 16(4), pages 538-559, August.
  14. 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.
  15. Acemoglu,Daron & Robinson,James A., 2009. "Economic Origins of Dictatorship and Democracy," Cambridge Books, Cambridge University Press, number 9780521671422, August.
  16. 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.
  17. 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.
  18. 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.
  19. Lindert Peter H., 1994. "The Rise of Social Spending, 1880-1930," Explorations in Economic History, Elsevier, vol. 31(1), pages 1-37, January.
  20. 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.
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