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

60 Pages Posted: 22 Dec 2011  

Vincenzo Galasso

University of Lugano; Centre for Economic Policy Research (CEPR)

Paola Profeta

Bocconi University

Multiple version iconThere are 3 versions of this paper

Date Written: December 2011

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.

Keywords: culture, family ties, pension design

JEL Classification: H10, H55, N30, Z10, Z13

Suggested Citation

Galasso, Vincenzo and Profeta, Paola, When the State Mirrors the Family: The Design of Pension Systems (December 2011). CEPR Discussion Paper No. DP8723. Available at SSRN: https://ssrn.com/abstract=1976064

Vincenzo Galasso (Contact Author)

University of Lugano ( email )

Via Giuseppe Buffi 13
Lugano, 6900
Switzerland

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Paola Profeta

Bocconi University ( email )

Milan, MI
Italy

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