Young and old competing for public welfare services

Abstract

Generational conflict affects the supply of public welfare services, and the rising share of elderly is seen as a threat to educational spending. We offer an analysis of spending in child care, primary and lower secondary education, and care for the elderly related to the size of young and old voters. The age groups face possible disadvantages of being part of a large cohort, but also can gain political strength to crowd out services for the other groups. The decentralization of public services in Scandinavia allows for the simultaneous analysis of age related services. Using panel data from Denmark for the period 1989-1996, we find that the elderly are reducing spending in child care and education, but the young do not threaten services for the elderly. It is a disadvantage for both the elderly and the young to be part of a large cohort. The possible Tiebout-bias is handled with instrument variables predicting the relevant age composition variables.Public welfare services; group size; age composition of the population; generational conflict