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

  • 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
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Handle: RePEc:cpr:ceprdp:8723
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  1. 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.
  2. 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.
  3. repec:crr:crrwps:2004-07 is not listed on IDEAS
  4. 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.
  5. 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.
  6. Alberto F. Alesina & Yann Algan & Pierre Cahuc & Paola Giuliano, 2010. "Family Values and the Regulation of Labor," NBER Working Papers 15747, National Bureau of Economic Research, Inc.
  7. Alesina, Alberto & Giuliano, Paola, 2007. "The Power of the Family," IZA Discussion Papers 2750, Institute for the Study of Labor (IZA).
  8. Galasso, Vincenzo & Gatti, Roberta & Profeta, Paola, 2008. "Investing for the Old Age: Pensions, Children and Savings," CEPR Discussion Papers 6825, C.E.P.R. Discussion Papers.
  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. 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.
  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. 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.
  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. 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).
  15. J. Ignacio Conde-Ruiz & Paola Profeta, 2007. "The Redistributive Design of Social Security Systems," Working Papers 2007-07, FEDEA.
  16. 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.
  17. Fernández, Raquel & Fogli, Alessandra, 2005. "Culture: An Empirical Investigation of Beliefs, Work and Fertility," CEPR Discussion Papers 5089, C.E.P.R. Discussion Papers.
  18. Acemoglu,Daron & Robinson,James A., 2006. "Economic Origins of Dictatorship and Democracy," Cambridge Books, Cambridge University Press, number 9780521855266, November.
  19. 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.
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