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Social Pensions in Europe: The Aim, The Impact and The Cost

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  • Frieda Vandeninden

Abstract

The aim of this paper is to evaluate the impact in terms of poverty and cost of the introduction of social (or noncontributory) pensions in Europe. We use data from the household survey EU-SILC and focus on 17 countries. After reviewing the existence of social pensions in Europe and evidence of old-age poverty, we simulate – in a static framework – the introduction of two social pension schemes: universal and means tested social pensions. We see that the old-age poverty would substantially decrease (average poverty rate goes from 19.7 to 2.5 percent with the universal scheme) but not totally, even though the level of the universal pension is set up to the poverty line. The impact on poverty with the means tested social pension is quite similar (though always smaller) than the one with the universal pension, since most elderly have few other income sources than pensions. On the opposite, it costs less. In fact, the means test reduces substantially the number of entitled elderly while the universal pension leads to a ‘leakage’ to non-poor elderly.

Suggested Citation

  • Frieda Vandeninden, 2010. "Social Pensions in Europe: The Aim, The Impact and The Cost," CREPP Working Papers 1007, Centre de Recherche en Economie Publique et de la Population (CREPP) (Research Center on Public and Population Economics) HEC-Management School, University of Liège.
  • Handle: RePEc:rpp:wpaper:1007
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    File URL: http://www2.ulg.ac.be/crepp/papers/crepp-wp201007.pdf
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    1. J. Ignacio Conde-Ruiz & Paola Profeta, "undated". "What Social Security: Beveridgean or Bismarckian?," Working Papers 2003-16, FEDEA.
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    3. Tim Goedemé & Wim Van Lancker, 2009. "A Guaranteed Minimum Income for Europe’s Elderly. Options and Pitfalls in the Design of a Harmonised Basic Pension Scheme in the European Union," Working Papers 0901, Herman Deleeck Centre for Social Policy, University of Antwerp.
    4. Dreze, Jean & Srinivasan, P. V., 1997. "Widowhood and poverty in rural India: Some inferences from household survey data," Journal of Development Economics, Elsevier, vol. 54(2), pages 217-234, December.
    5. Kanbur, Ravi & Keen, Michael & Tuomala, Matti, 1994. "Labor Supply and Targeting in Poverty Alleviation Programs," World Bank Economic Review, World Bank Group, vol. 8(2), pages 191-211, May.
    6. Palacios, Robert & Sluchynsky, Oleksiy, 2006. "Social pensions Part I : their role in the overall pension system," Social Protection and Labor Policy and Technical Notes 36237, The World Bank.
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