When the State Mirrors the Family: The Design of Pension Systems

This paper studies the transmission mechanism from family culture to economic institutions, by analyzing the impact of the within family organization on the original design of the public pension systems. We build a simple OLG model with families featuring either weak or strong internal ties. When pensions systems are initially introduced, in society with strong ties they replicate the tight link between generations by providing earnings related benefits; whereas in societies with weak family ties they only act as a safety net. To test this transition mechanism, we consider Todd (1982) historical classification of family types across countries. We find that in societies dominated by absolute nuclear families (i.e., weak family ties), pension systems act as a flat safety net entailing a large within-cohort redistribution, and viceversa in societies characterized by stronger family ties where pension systems are more generous. This link between the type of families and the design of pension systems is robust to testing for alternative explanations, such as legal origin, religion, urbanization and democratization of the country at the time of their introduction. Interestingly, historical family types matter for explaining the design of the pension systems, which represents a persistent feature, but not their size, which have largely changed over time.culture, institutions, historical evidence

Redistribution or Education? The Political Economy of the Social Race

In an overlapping generations model with two social classes, rich and poor, parents of the different social classes vote on two issues: redistributive policies for them and education investment for their children. Public education is the engine for growth through its effect on human capital; but it is also the vehicle through which children born to poor families may exchange their positions with children born to rich families. This is because education reduces the probability of a mismatch, i.e. individuals with low talent but coming from rich families being placed in jobs which should be reserved to people with high talent (and vice-versa). We find a political economy equilibrium of the voting game using probabilistic voting. When the poor are more politically influential, the economy is characterized by higher levels of education, growth and social mobility than under political regimes supported by the rich; pre-tax inequality is greater in the former case, but post-tax is lower.social mobility, talents’ mismatch, probabilistic voting

What social security: Beveridgean or Bismarckian?

Why are Bismarckian social security systems associated with larger public pension expenditures, a smaller fraction of private pension and lower income in-equality than Beveridgean systems? These facts are puzzling for political economy theories of social security which predict that Beveridgean systems, involving intra-generational redistribution, should enjoy larger support among low-income people and thus be larger. This paper explains these features in a bidimensional political economy model. In an economy with three income groups, low-income support a large, redistributive system; middle-income favor an earning-related system, while high-income oppose any public system, since they have access to a superior saving technology, a private system. We show that, if income inequality is large, the voting majority of high-income and low-income supports a (small) Beveridgean system, and a large private pillar arises; the opposite occurs with low inequality. Additionally, when the capital market provides higher returns, a Beveridgean system is more likely to emerge.Political economy, public versus private social security, pensions system across european countries, income inequality, structure-induced equilibrium

In Italy’s ‘male gerontocracy’, gender quotas induced the restructuring of company boards

Quotas encouraged a better selection mechanism through the entry of qualified women, writes Paola Profet

Gender equality and the COVID-19 pandemic: labour market, family relationships and public policy

This paper examines the main dimensions of gender inequalities before the pandemic and their evolution during the COVID-19 crisis. It focuses on Europe and identifies three different main interrelated dimensions: labour market, family relationships – namely, how COVID-19 affected the unpaid care burden and living conditions of working parents – and public policies that could help achieve a more gender-equal recovery

Lobbying for Education in a Two-sector Model

In a two-period model, firms specialized in two different sectors lobby to induce the government to subsidize the type of education complementary to their production. Lobbying is endogenous. We show that, if lobbying is not costly, both sectors will lobby in equilibrium and education policy will induce the same skill composition that would be chosen by the social planner. However, if lobbying is costly, only one sector finds it profitable to offer monetary contribution and direct resources towards the type of education required by its production. Which sector will engage in lobbying depends on relative size, productivity and price in the two sectors.

Gender Culture and Gender Gap in Employment

This paper analyzes to what extent gender culture affects gender gap in employment. Drawing on Italian data, we measure culture by building two indices: one based on individual attitudes, as done in the existing literature; one based on firms’ attitudes. Firms’ beliefs, which express their set of ideas, values and norms, though generally neglected, are as important as individuals’ attitudes to explain female labor market outcomes. Using an instrumental variable analysis, we show that our index of gender culture based on firms’ attitudes is significant in explaining gender gap in employment in Italian provinces. We show that the same holds when culture is measured with reference to individual attitudes.firm’s culture, Italian provinces, instrumental variable

Why are More Redistributive Social Security Systems Smaller? A Median Voter Approach

We suggest a political economy explanation for the stylized fact that intragenerationally more redistributive social security systems are smaller. Our key insight is that linking benefits to past earnings (less redistributiveness) reduces the efficiency cost of social security (due to endogenous labor supply). This encourages voters who benefit from social security to support higher contribution rates in political equilibrium. We test our theory with a numerical analysis of eight European countries. Our simple, but suggestive median voter model performs relatively well in explaining the stylized fact and cross-country differences in social security contribution rates.earnings-related and flat-rate benefits, social security, public pensions, median voter model

Great Expectations: The Determinants of Female University Enrolment in Europe

We empirically investigate the determinants of the female decision of investing in post-secondary education, focusing on the role played by the context where young women take their education decision. We first develop a stylized two-period model to analyze the female decision of investing in education and highlight two main determinants: the time to be devoted to child care and the probability of working in a skilled job. We then use data on educational decisions of women in the 17-21 age group drawn from EU-Silc, available for the years 2004-2008. From the same survey we construct context indicators at the regional level, and exploit regional variability to identify how women’s educational investment reacts to changes in the surrounding context. We find that the share of working women with children below 5 and the share of women with managerial positions or self-employed positively affect the probability that women enrol in post-secondary education. The same does not hold for men.post-secondary education, university, child care time requirement, managerial positions, self-employment, context, EU-Silc data, repeated cross-section

On the Political Economics of Tax Reforms

There is often a gap between the prescriptions of an “optimal” tax system and actual tax systems, some of which can be neither efficient economically nor efficient at redistributing income. With a focus on personal income taxes, this paper reviews the political economics literature on tax systems and reforms to see whether political mechanisms allow us to better understand why tax systems look the way they look. Finally, we exploit a database of reforms in labour taxation in the European Union to check the determinants of all reforms, on the one hand, and of targeted reforms, on the other hand. The results fit well with political economy theories and show that political variables carry more weight in triggering reforms than economic variables. This shed light on whether and how tax reforms are achievable. It also explains why many reforms that seem economically optimal fail to be implemented.political economy, taxation, personal income tax