Preferences for Solidarity and Attitudes Towards the Dutch Pension System: Evidence from a Representative Sample

Abstract

Collective pension systems are based on the principle of solidarity across and within generations. Using methods from experimental economics we elicit preferences for solidarity of different age cohorts towards the same and other age cohorts for a representative sample of the Dutch population. In addition, we use survey methods to measure stated inter- and intra-generational altruism and solidarity attitudes with respect to the Dutch pension system. Finally, we analyze how revealed solidarity preferences are related to demographic and socio-economic characteristics of participants by linking the experimental and survey data to administrative data of the Dutch population maintained by Statistics Netherlands (CBS).

In our study, participants made decisions in a ‘solidarity game’ where real money was at stake. They had to decide how they would share money with another participant in case they received the money while the other participant did not. We found that participants were willing to share about 40% of the money received. This shows that participants on average had a strong preference for (ex-ante) solidarity. However, the results also show large heterogeneity as well as a bias in favor of the age group that a participant belongs to. A significant percentage of young participants were prepared

to share substantially more with other young participants than with other age groups. Likewise, a large percentage of old participants were prepared to share substantially more with other old participants than with other age groups. We also find that beliefs about what others will give (i.e. anticipated reciprocity) correlate strongly with solidarity preferences: participants who expect more when in need show more solidarity towards others who are likewise in need. Remarkably, participants were rather pessimistic about the solidarity of others within and across age groups in the sense that they expected others to give substantially less than they themselves would actually do. Finally, a number of demographic and socio-economic characteristics (gender, education, marital status, political involvement) of our participants are statistically significantly related to the elicited solidarity preferences.

In the survey, participants of all age categories indicated that they believe that solidarity between the young and the old is under pressure. We also see clear differences between young and old participants regarding the preferred pension system. While old participants favor a collective system over an individual system, for young participants the reverse holds. Opinions on the Dutch pension system correlate to some extent with the elicited solidarity preferences. Overall, however, the correlation between survey and experimental measures is relatively weak. This indicates that pension policymakers should take into account that stated preferences on solidarity do not necessarily reflect the true solidarity preferences of individuals.

Keywords: solidarity, intergenerational, intragenerational, pension systems

JEL Classification: D03, D64, H55, C91, C93