How does ageing affect the welfare state?

Ageing 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...

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Bibliographic Details
Published in:European Journal of Political Economy 2007-06, Vol.23 (2), p.554-563
Main Authors: Galasso, Vincenzo, Profeta, Paola
Format: Article
Language:English
Subjects:
Aging
Beveridgean
Bismarckian
Economic analysis
Political influences
Population ageing
Social change
Social Security
Social systems
Welfare State
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Summary:Ageing 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 ageing on the size of the welfare state.
ISSN:0176-2680
1873-5703
DOI:10.1016/j.ejpoleco.2006.04.001