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

  • Vincenzo Galasso

    (Università della Svizzera Italiana, Dondena, IGIER and CEPR, Switzerland)

  • Paola Profeta

    (Econpubblica and Dondena, Università Bocconi, Italy)

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 (f.i. Anglo-Saxon countries), safety net pension systems emerged; and viceversa 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 Condorcet Center for political Economy in its series Economics Working Paper from Condorcet Center for political Economy at CREM-CNRS with number 2012-04-ccr.

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Date of creation: Apr 2012
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Handle: RePEc:tut:cccrwp:2012-04-ccr
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  1. 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).
  2. Alesina, Alberto & Algan, Yann & Cahuc, Pierre & Giuliano, Paola, 2010. "Family Values and the Regulation of Labor," IZA Discussion Papers 4747, Institute for the Study of Labor (IZA).
  3. Gilles Duranton & Andrés Rodríguez-Pose & Richard Sandall, 2008. "Family types and the persistence of regional disparities in Europe," LSE Research Online Documents on Economics 33152, London School of Economics and Political Science, LSE Library.
  4. Caucutt, Elizabeth & Cooley, Thomas F & Guner, Nezih, 2007. "The Farm, the City and the Emergence of Social Security," CEPR Discussion Papers 6131, C.E.P.R. Discussion Papers.
  5. 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.
  6. 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.
  7. Vincenzo Galasso & Roberta Gatti & Paola Profeta, 2009. "Investing for the old age: pensions, children and savings," International Tax and Public Finance, Springer, vol. 16(4), pages 538-559, August.
  8. J. Ignacio Conde-Ruiz & Paola Profeta, 2007. "The Redistributive Design of Social Security Systems," Working Papers 2007-07, FEDEA.
  9. Acemoglu,Daron & Robinson,James A., 2009. "Economic Origins of Dictatorship and Democracy," Cambridge Books, Cambridge University Press, number 9780521671422, May.
  10. Vincenzo Galasso, 2008. "The Political Future of Social Security in Aging Societies," MIT Press Books, The MIT Press, edition 1, volume 1, number 026257246x, June.
  11. repec:crr:crrwps:2004-07 is not listed on IDEAS
  12. Tim Krieger & Stefan Traub, 2008. "Back to Bismarck? Shifting Preferences for Intragenerational Redistribution in OECD Pension Systems," Working Papers CIE 13, University of Paderborn, CIE Center for International Economics.
  13. Raquel Fernandez & Alessandra Fogli, 2005. "Culture: an empirical investigation of beliefs, work, and fertility," Staff Report 361, Federal Reserve Bank of Minneapolis.
  14. Alesina, Alberto & Giuliano, Paola, 2007. "The Power of the Family," IZA Discussion Papers 2750, Institute for the Study of Labor (IZA).
  15. Lindert Peter H., 1994. "The Rise of Social Spending, 1880-1930," Explorations in Economic History, Elsevier, vol. 31(1), pages 1-37, January.
  16. 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.
  17. 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.
  18. 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.
  19. 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.
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