The Great Recession threatened the financial sustainability of the public finances of many European countries and, combined with the ongoing demographic changes, poses their welfare state under stress, deeply affecting the intergenerational relationships. The aim of this project is to provide new cross-country empirical evidence of how the interaction between economic/demographic changes and the welfare systems impacts on the distribution of the resources, rights and responsibilities between generations.
The traditional redistribution of resources from the young to the old operated by the welfare systems – mainly through the pay as you go financing of the main welfare provisions – is boosted by the fast population ageing. However, at intra-household level opposite mechanisms are in place through the shift of monetary and in-kind resources from the old to the young – mainly through inter-vivos transfers and informal care provisions. The analysis takes both redistributive flows into account in the first two Work-Packages.
Work-Package 1 (Intergenerational redistribution of resources) evaluates the impact of different models of welfare state on the intergenerational relationships, focusing on the role of institutions aimed at providing resources to the elderly while the burden of their financing is mainly on the working age population. Starting from Titmuss’s (1955) articulation of social, fiscal, and occupational welfare, the work package focuses on the role of pensions and the tax system in shaping the gross and net income distribution adopting a cross-sectional perspective and providing new evidence on the relation between welfare provisions and elderly wellbeing. The social welfare perspective is exploited by the role of the minimum pension provisions on elderly wellbeing (Task 1.1). Fiscal and occupational welfare provisions are analysed by focusing on the redistributive effects of taxes on public and private pensions compared to taxes on earnings (Task 1.2) and the revenue and distributive consequences of pension tax expenditures that differentiate the system in place from a theoretical benchmark (Task 1.3).
Work-Package 2 (Intergenerational insurance of income and care risks) investigates the implications of the demographic and economic changes on income distribution and informal caring provision at intra-household level in European countries in the last ten years.
The financing of welfare systems based on a pay as you go mechanism is based on an implicit intergenerational pact. The basic assumption is that if individuals do not understand and agree with the final objectives of the welfare system, they are tempted to put in act behaviours that potentially can distort its effects and enhance intergenerational conflicts. The Great Recession determined a sensible increase in the unemployment rates, especially among the young; a sharp reduction in the generosity of social assistance in favor of the low income and a reduction in the public provision of services. The work package analyses the effect of this evidence on the patterns of income mobility by cohorts (Task 2.1), the trends in household living arrangements and the redistributive impact of the ‘cross-generational transfers’ (Task 2.2), the role of grandparents on labour market participation and fertility decisions of their daughters (Task 2.3), and the impact of career interruptions on labour market disadvantages (Task 2.4).
Work-Package 3 (Intergenerational conflicts) investigates the perceptions and comprehension that individuals have of the aims of the main welfare provisions and of their implications in terms of intergenerational relationships given the current demographic trends.
Under the threat of the financial crises many European countries underwent through radical reforms of their welfare systems. These reforms have been undoubtedly successful in recovering the financial sustainability, but met the strong opposition of large groups of the population. Almost by definition reforms aiming at reducing the generosity of welfare provisions disrupt the plans for the future of many households and are resisted by the ones involved. However, the last reforms met the strong opposition also of groups of the population that actually were supposed to gain from them, that is the young. This work package aims at exploring the underlying reasons of this evidence and proposing strategies to help European countries avoiding intergenerational conflicts while facing challenging ageing process and weak public finance sustainability.
A survey will be run in Belgium, Italy and Spain allowing new empirical research to be conducted on the role of communication, economic and financial literacy, and comprehension of the overall design of the welfare systems, exploiting the cross-country specificity.
The analysis conducted in the three Work-Packages covers a variety of welfare state models and most European countries, providing a stronger base for generalizing the results.
The coordinator is CeRP – Center for Research on Pensions and Welfare Policies – Collegio Carlo Alberto, based in Turin, Italy.
Partner institutions are: Universidad de Alcalá – Department of Economics (UAH) – and Centre for Social Policy, University of Antwerp (UA-CSB) – Belgium.
The consortium has been formed to achieve academic excellence, interdisciplinary approach in delivering policy-oriented and academic outputs exploiting a well balanced mix of partners’ expertise in European research projects. Indeed, the consortium combines the expertise of CeRP-CCA on institutional aspects, economics and micro-simulation with the theoretical, econometrical and modelling expertise of UAH and with the knowledge on social policies, sociology and cross-country analyses of UA-CSB.
Project coordination and management
The management structure and its procedures aim to minimise complexity (and costs), while ensuring transparency, commitment and synergies among partners, and a continuous circular flow of information. CeRP-CCA, as coordinator, will represent the consortium externally towards the Joint Call Secretariat (JCS) and and will be responsible for the internal scientific management (such as controlling, reporting, intellectual property rights and contact with the JCS) of the project. The second level of CIRCLE governance is the Steering Committee, including the scientific leader and up to two persons from each partner institution.
The Scientific Committe includes:
Bea Cantillon (University of Antwerp)
Elsa Fornero (University of Turin and CeRP), chair
Alain Jousten (University of Liège)
André Masson (Paris School of Economics)
Manos Matsaganis (Politecnico di Milano)
Pierre Pestieau (University of Liège)