CIRCLE is funded under the first Joint Programming Initiative “More Years, Better Lives” 2016 call for proposals. Joint Programming is a new approach to foster collaboration and coordination in R&D in Europe. It is a member-states driven activity. The Joint Programming Initiative (JPI) “More Years, Better Lives – The Potential and Challenges of Demographic Change” seeks to enhance coordination and collaboration between European and national research programmes related to demographic change. Areas affected by demographic change cover a wide range of research fields and policy topics ranging from health to social welfare, education & learning, work & productivity to housing, urban & rural development and mobility. Read more at www.jp-demographic.eu
ABOUT THE PROJECT
The aim of CIRCLE is to provide new empirical evidence of the impact of the interaction between the economic and demographic changes and the welfare systems on the distribution of the resources, rights and responsibilities between generations. In many EU countries welfare provisions addressed to older people are pay as you go financed and fast population ageing boosts redistribution from the young to the old. However compensatory mechanisms redistributing resources from the old to the young, are often implemented at intra-household level, mainly through inter-vivos transfers and informal care provisions. The analysis takes both redistributive flows into account and covers a variety of EU welfare state models, giving a strong base for generalizing the results and deriving useful policy implications. Read more at www.circle-cerp.carloalberto.org
Leading partner: Center for Research on Pensions and Welfare Policies – Collegio Carlo Alberto (Italy); Partners: Centre for Social Policy – University of Antwerp (Belgium); University of Alcalá (Spain)
Coordinator: Elsa Fornero (University of Turin and CeRP)
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)
WORK IN PROGRESS
Paper: “Size and distributional pattern of pension-related tax expenditures in European countries” by Salvador Barrios, Flavia Coda Moscarola, Francesco Figari, Luca Gandullia
(Task 1.3: Revenue and distributive effects of pension tax expenditures)
Tax expenditures are exceptional tax treatments with respect to a generally agreed benchmark tax system. They are granted to categories of tax-payers with the aim to achieve specific socio-economic and political goals. Tax expenditures are widely used by EU Member States but little is known on their effectiveness and efficiency. Nevertheless, in the present context of constrained public budgets, policy recommendations often call for streamlining them. This paper quantifies the fiscal and distributional impact of pension-related tax expenditures in 27 European countries using EUROMOD, the EU-wide microsimulation model. We focus on the tax expenditures related to the accumulation and decumulation phases of II and III pension pillars. We find that pension-related tax expenditures can have a sizeable revenue cost and strong impact on inequality and poverty reduction. Moreover tax expenditures tend to be progressive at two levels. First, among elderly by favouring lower income pensioners, mainly through a favorable treatment of pension incomes. Second, among working-age individuals, through partial or no deduction of pension contributions, draining resources from those at the top of the income distribution.
Paper: “A simple subgroup decomposable measure of upward and downward income mobility” by Elna Bárcena and Olga Cantó
(Task 2.1: The changing patterns of income mobility by age cohorts in EU countries)
We propose a subgroup decomposable class of income mobility measures with good axiomatic properties. This framework is explicit in incorporating the necessary judgements about how to aggregate individual income gaps. Interestingly, this strategy allows us to provide intuitive and simple measures of upward and downward mobility that are easy to comprehend and communicate to policy makers. Moreover, these measures are consistent with a simple and intuitive graphical device. As an empirical illustration of the use of this class of measures, we present an analysis of income mobility for different age cohorts in various EU countries using EUSILC 4-year longitudinal data from 2004 up to 2015.
Paper: “Financial solidarity within multi-generation households in Europe” by Gerlinde Verbist, Ron Diris, Frank Vandenbroucke
(Task 2.2b: Old age support for children? Combating child poverty through pension benefits in extended families)
Extended families, where three or more generations cohabit within the same household, are a relatively common household form in Southern Europe and, especially, Eastern Europe. There can be different reasons or motivations behind the formation of such families, ranging from individual voluntary choices to the external socio-economic or cultural context imposing this form of cohabitation. In previous work, researchers have generally focused on the impact of extended families on labour supply and time spent on informal and formal care. However, one important implication of the formation of extended families is often left out. Elderly may bring pension income into the household, which is often of substantial size. This is particularly relevant given that extended families especially form in poor countries where social protection from cash transfers is generally low but pensions are relatively high. Moreover, extended families are especially common among poor families that cannot rely on market income alone. As such, financial distress or poverty risks can be a main driver behind the formation of extended families. In any way, they are a very relevant aspect of cohabiting because they automatically change the income position of the household, and often substantially so. We investigate in this paper to what extent the sharing of income within multigeneration households is beneficial for different generations. We focus then on the contribution of income from the elderly and how it affects child poverty in extended families. Moreover, multi-generational households also provide economies of scale as more people live together. This affects the equivalence scale compared to as situation of separate households. The analysis continues to what extent sharing assumptions differ across household types and how this may affect the equivalence scale traditionally used in empirical analysis. We will then test several scenarios under different sharing assumptions and their impact on child poverty. The analysis covers the EU countries, with special attention to those countries with the highest prevalence of multigeneration households.
Working paper: “How long is too long? Long-term effects of maternity-related job interruptions on mothers’ income in 10 European countries” by Giulia M. Dotti Sani, Matteo Luppi
(Task 2.4. Career interruptions and labour market disadvantages)
This article inquires whether work interruptions due to childbearing and childrearing have long-term effects on mothers’ absolute and relative income in later life in ten European countries. Previous studies have found significant differences in earned income among prime-age women and men, and mothers and fathers, with mothers earning significantly less than men and childless women, both in absolute and relative terms. Many factors account for such differences, including mothers’ reduced working hours and productivity, the type of job, job interruptions, self-selection and statistical discrimination. However, while research has investigated the short- and medium-term consequences of having children on mothers absolute and relative earnings, less is known about the long-term effects of childbearing and childrearing on mothers’ income in later life. In this article, we investigate whether the length of maternity-related work interruptions is associated with income inequalities at a later age. The analysis, based on four waves of SHARE data (N 7,746), indicates that while short work interruptions are not negatively associated with mothers’ absolute and relative earned income in later life, long work interruptions and a failure to return to work have a large impact on women’s long-term economic wellbeing, especially in countries where decommodification through family and pension policies is limited.
Workshop “Household Finance and Retirement Savings” 19-20 October 2017, Collegio Carlo Alberto, Turin
The workshop, organized by CeRP-Collegio Carlo Alberto, CINTIA-Centro Interuniversitario Nestpar Italy and the Department of Economic, Social, Mathematical and Statistical Sciences of the University of Turin, fostered interaction between senior and junior researchers working in the area of household finance and retirement savings. The workshop included a session dedicated to the work in progress of the CIRCLE project.