How Does Ageing Affect the Welfare State?

Galasso, Vincenzo; Profeta, Paola

doi:10.2139/ssrn.1338091

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How Does Ageing Affect the Welfare State?

Econpubblica Working Paper No. 114

19 Pages Posted: 6 Feb 2009

See all articles by Vincenzo Galasso

Vincenzo Galasso

Centre for Economic Policy Research (CEPR); Bocconi University; University of Bocconi - Innocenzo Gasparini Institute for Economic Research (IGIER); CESifo (Center for Economic Studies and Ifo Institute); Bocconi University - Baffi Carefin Centre

Paola Profeta

Bocconi University

Date Written: November 5, 2006

Abstract

In a political economy environment, aging has opposite economic and political effects on the size of the welfare state. On one side, it tends to decrease the profitability of a welfare state that features a PAYG pension system, thus inducing individuals to prefer a smaller system; on the other side the pivotal (median) voter becomes older (or poorer) and hence more willing to support a larger system. The overall effect is thus ambiguous.

We show that specific features of the welfare system, such as its composition and the redistributive design of social security may change the magnitude of the economic effect and thus of the overall impact of aging on the size of the welfare state.

Suggested Citation: Suggested Citation

Galasso, Vincenzo and Galasso, Vincenzo and Profeta, Paola, How Does Ageing Affect the Welfare State? (November 5, 2006). Econpubblica Working Paper No. 114, Available at SSRN: https://ssrn.com/abstract=1338091 or http://dx.doi.org/10.2139/ssrn.1338091