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

Vincenzo Galasso and Paola Profeta

No 3191, CESifo Working Paper Series from CESifo

Abstract: This paper studies the transmission mechanism from family culture to economic institutions, by analyzing the impact of the within family organization on the original design of the public pension systems. We build a simple OLG model with families featuring either weak or strong internal ties. When pensions systems are initially introduced, in society with strong ties they replicate the tight link between generations by providing earnings related benefits; whereas in societies with weak family ties they only act as a safety net. To test this transition mechanism, we consider Todd (1982) historical classification of family types across countries. We find that in societies dominated by absolute nuclear families (i.e., weak family ties), pension systems act as a flat safety net entailing a large within-cohort redistribution, and viceversa in societies characterized by stronger family ties where pension systems are more generous. This link between the type of families and the design of pension systems is robust to testing for alternative explanations, such as legal origin, religion, urbanization and democratization of the country at the time of their introduction. Interestingly, historical family types matter for explaining the design of the pension systems, which represents a persistent feature, but not their size, which have largely changed over time.

Keywords: culture; institutions; historical evidence (search for similar items in EconPapers)
JEL-codes: H10 H55 N30 Z10 Z13 (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

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Related works:
Journal Article: When the State Mirrors the Family: The Design of Pension Systems (2018)
Working Paper: When the State Mirrors the Family: The Design of Pension Systems (2012)
Working Paper: When the State Mirrors the Family: The Design of Pension Systems (2012)
Working Paper: When the State Mirrors the Family: The Design of Pension Systems (2011)
Working Paper: When the State Mirrors the Family: The Design of Pension Systems (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_3191

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