Fiscal sustainability and demographic change: a micro-approach for 27 EU countries

The effect of demographic change on the labor force and on fiscal revenues is topical in light of potential pension shortfalls. This paper evaluates the effect of demographic changes between 2010 and 2030 on labor force participation and government budgets in the EU-27. Our analysis involves the incorporation of population projections, and an explicit modeling of the supply and demand side of the labor market. Our approach overcomes key shortcomings of most existing studies that focus only on labor supply when assessing the effects of policy reforms. Ignoring wage reactions greatly understates the increase in fiscal revenues, suggesting that fiscal strain from demographic change might be less severe than currently perceived. Beyond, ou r micro-based approach captures the impact on fiscal revenues more accurately than previous studies. Finally, as a policy response to demographic change and worsening fiscal budgets, we simulate the increase in the statutory retirement age. Our policy simulations confirm that raising the statutory retirement age can balance fiscal budgets in the long run

The Drivers of Income Inequality in Rich Countries

Rising income inequality has recently come centre-stage as a core societal concern for rich countries. The diagnosis of the forces driving inequality upwards and their relative importance remains hotly contested, notably with respect to the roles of globalization versus technology and of market forces versus institutions and policy choices. This survey provides a critical review and synthesis of recent research. The focus is on income inequality across the entire distribution, rather than only on what has been happening at the very top. We pay particular attention to including what has been learned from the analysis of micro-data, to ensuring that the coverage is not unduly US-centric, and to analyses of the interrelations between the different drivers of inequality. The marked differences in inequality trends across countries and time-periods reflect how global economic forces such as globalisation and technological change have interacted with differing national contexts and institutions. Major analytical challenges stand in the way of a consensus emerging on the relative importance of different drivers in how income inequality has evolved in recent decades

Calamities, common interests, shared identity: What shapes altruism and reciprocity?

We conduct a large-scale survey experiment in nine European countries to study how priming a major crisis (COVID-19), common economic interests, and a shared identity influences altruism, reciprocity and trust of EU citizens. We find that priming the COVID-19 pandemic increases altruism and reciprocity towards compatriots, citizens of other EU countries, and non-EU citizens. Priming common European values also boosts altruism and reciprocity but only towards compatriots and fellow Europeans. Priming common economic interests has no tangible impact on behaviour. Trust in others is not affected by any treatment. Our results are consistent with the parochial altruism hypothesis, which asserts that because altruism arises out of inter-group conflict, humans show a tendency to favor members of their own groups