Welfare states as lifecycle redistribution machines

Vanhuysse, Pieter ORCID:, Medgyesi, Márton and Gál, Róbert Iván (2021) Welfare states as lifecycle redistribution machines. Plos One, 16 (8). DOI

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Social scientists identify two core functions of modern welfare states as redistribution across (a) socio-economic status groups (Robin Hood) and (b) ‘the lifecycle’ (the piggy bank). But what is the relative importance of these functions? The answer has been elusive, as the piggy bank is metaphorical. The intra-personal time-travel of resources it implies is based on non-quid-pro-quo transfers. In practice, ‘lifecycle redistribution’ must operate through inter-age-group resource reallocation in cross-section. Since at any time different birth cohorts live together, ‘resource-productive’ working-aged people are taxed to finance consumption of ‘resource-dependent’ younger and older people. In a novel decomposition analysis, we study the joint distribution of socio-economic status, age, and respectively (a) all cash and in-kind transfers (‘benefits’), (b) financing contributions (‘taxes’), and (c) resulting ‘net benefits,’ on a sample of over 400,000 Europeans from 22 EU countries. European welfare states, often maligned as ineffective Robin Hood vehicles riddled with Matthew effects, are better characterized as inter-age redistribution machines performing a more important second task rather well: lifecycle consumption smoothing. Social policies serve multiple goals in Europe, but empirically they are neither primarily nor solely responsible for poverty relief and inequality reduction.

Item Type:Article
Divisions:Corvinus Institute for Advanced Studies (CIAS)
Subjects:Economic development
ID Code:6763
Deposited By: MTMT SWORD
Deposited On:06 Sep 2021 13:38
Last Modified:13 Apr 2022 13:01

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