Welfare state and social Europe

James Banks, Carl Emmerson, Gemma Tetlow, 07 May 2016

Many countries are increasing the age at which people can start claiming state-funded pensions. One objection often raised is that such policies are unfair because some will be too unhealthy to remain in paid work. This column compares employment rates in England of older people today to those of earlier generations, and also to those of younger people today. These comparisons suggest that a significant minority of older people appear to be unable to work on the grounds of health alone. 

Matthias Doepke, Fabian Kindermann, 03 May 2016

Europe is in the midst of a major demographic crisis, with many countries facing ultra-low fertility rates. This column uses survey data from 19 European countries to show how low fertility can be traced to disagreement within couples about having babies. In low-fertility countries, it is usually the women who bear most of the burden of childbearing, and who veto having more babies. Fertility can be raised by policies that specifically lower cost to women of childcare, whereas general subsidies for childbearing are much less effective.

Sagiri Kitao, 15 April 2016

Most countries with a generous pay-as-you-go social security system and ageing demographics will need to implement significant welfare reform, such as a major cut in benefits or a significant increase in distortionary taxation. Individuals’ uncertainty about when such a policy change will occur will cause precautionary saving and changes in factor prices, affecting aggregate welfare. This column uses evidence from Japan to show that delaying welfare reform will benefit the elderly, at a long-lasting cost to the young.

Simon H. Boserup, Wojciech Kopczuk, Claus T. Kreiner, 11 March 2016

It is often suggested that intergenerational bequests such as inheritances create and perpetuate wealth inequality. This column uses Danish data to explore the effects of bequests on the wealth distribution. While bequests are found to increase the dispersion of absolute wealth inequality, relative inequality declines. These findings suggest that inheritance alone need not increase wealth inequality.

Arash Nekoei, Andrea Weber, 10 July 2015

The generosity of unemployment insurance is often cited as a reason for long spells of joblessness. But this view neglects other important, and potentially positive, economic aspects of such programmes. Using Austrian data, this column presents evidence that unemployment insurance has a positive effect on the quality of jobs that recipients find. This can in turn have a positive effect on future tax revenues, and has implications for the debate on optimal insurance generosity.

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