Robert I. Gal, Hungarian Demographic Research Institute
Marton Medgyesi , TARKI, Social Research Instiute and Centre for Social Sciences
Pieter Vanhuysse, University of Southern Denmark
The welfare state has multiple roles in developed countries. Welfare programs redistribute income among overlapping generations in order to finance human capital investment and consumption of people in the inactive phases of their life-cycle from contributions of those in working age. Also, the welfare state alleviates poverty and mitigates inequality by transferring income from the relatively well-to-do to the poor. In this study we propose a cross-sectional framework to analyse redistribution by age and socio-economic status (SES) simultaneously and assess the relative importance of these two variables in explaining the access and contribution to public benefits. Our data from 2010 (based on EU-SILC and Household Budget Surveys) covers government transfers (cash and in-kind) and both direct and indirect taxes in 22 EU member states. We compare the importance of age and SES in explaining government transfers and taxes in a regression-analysis framework. We assess both causal importance (via comparison of coefficients) and dispersion importance (using the Shapley-value decomposition) of age and SES. Our results show that redistribution between age-groups is more important than redistribution by SES in all countries included in the study. The welfare state dominantly finances benefits for age groups in inactive age from resources collected from the well-to-do in working age. Our results suggest that poverty and inequalities mitigated by welfare states in EU countries are dominantly of demographic origin. Our results call for a revision of the image of the welfare state in general and questions traditional approaches to the analysis of welfare state efficiency.
Presented in Session P1. Poster Session Fertility, Family and the Life Course