Public Redistribution in Europe: Between Generations or Income Groups?

Abstract

Governments face a potential trade-off between provision for the population in retirement and the support of working-age households with low income. Using EUROMOD-based microdata from 28 countries, we quantify public redistribution to pensioner- and working-age households, distinguishing also by income group. In general, Northern European countries are characterized by a low net redistribution between households, limited public pensions, but a strong support of low-income households. By contrast, most Southern European countries are characterized by a high net redistribution to pensioners, offering generous benefits to some, but little support for working age households with low income. Our results show that a strong public net redistribution between households is associated with generous public benefits for a portion of the retirees, but negatively related to support for the population with low-income.

Keywords: Redistribution, Welfare state, Pensions, Inequality, EUROMOD