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

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  • Galasso, Vincenzo
  • Profeta, Paola

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 (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.

Suggested Citation

  • Galasso, Vincenzo & Profeta, Paola, 2011. "When the State Mirrors the Family: The Design of Pension Systems," CEPR Discussion Papers 8723, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:8723
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    More about this item

    Keywords

    culture; family ties; pension design;
    All these keywords.

    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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