The Connection between Welfare Regimes and Inter Age Reallocation Regimes: Results Based on National (Time) Transfer Accounts

Tanja Istenič, University of Ljubljana, Faculty of Economics
Lili Vargha, Hungarian Demographic Research Institute, Budapest
Jože Sambt, University of Ljubljana, Faculty of Economics

The economic life cycle and its financing strongly depend on country‑specific institutional and cultural settings. Therefore, it can be expected that the cross-country differences in intergenerational flows are connected with the differences in the welfare regimes. Previous research on transfer and welfare regimes is to some extent limited, because it focuses mainly on private transfers or it takes into account only certain age groups. This paper uses the recently developed National Transfer Accounts (NTA) methodology that enables comprehensive measurement of (1) public and (2) private intergenerational transfers (not only the ones that go through monetary transactions or exchanged for money, but also those transfers that result from the family provision of welfare in terms of unpaid work), as well as (3) asset‑based reallocations resulting from interaction with capital and financial markets. Moreover, we take into account all age groups. Our analysis provides comparable NTA results for 10 EU countries from 2010 and links welfare and inter‑age reallocation regimes. Based on five indicators, we demonstrate a clear connection between inter‑age reallocation and welfare regimes and classify countries into three different groups: social‑democratic (Finland, Hungary, Slovenia, and Sweden), conservative (Austria, France, Italy, and Spain), and liberal (Germany and the United Kingdom). Germany is the main exception; based on inter‑age reallocation results, it is not characterized as a prototypical conservative welfare state, but rather as a liberal welfare state.

The generational contract is the most important and continuous dimension of contemporary welfare systems. Much of the recent debate related to the generational contract focuses on the public dimension only (see e.g., Albertini, Kohli, & Vogel, 2007). However, to fully understand how population ageing affects welfare systems, the private dimension should be taken into account as well. In the last decade, few scholars have recognized the importance of private transfers and their link to the welfare regimes. Those studies, however, lack a comprehensive inclusion of both private and public transfers. The majority connect transfer and welfare regimes by focusing mainly on private transfers (e.g., Albertini & Kohli, 2013; Albertini et al., 2007). Some studies take into account both public and private transfers (e.g., Brandt & Deindl, 2013; Mudrazija, 2016), but they limit their focus only to certain age groups. They use data from the SHARE survey, in which only individuals aged 50+ were interviewed. Therefore, these analyses omit transfers that flow from younger parents to their children, which represent the most significant flows of household private transfers (e.g., Gál, Vanhuysse, & Vargha, 2016).

In this paper we use the National Transfer Accounts (NTA) methodology to comprehensively measure gender‑ and age-specific reallocations in a form of private and public transfers and asset‑based reallocations (ABR). By using harmonised micro and macro data sets for the same year (2010), we produce highly comparable NTA results for 10 EU countries for the first time. Furthermore, to capture family provision of welfare in terms of unpaid work, we combine NTA results with the National Time Transfer Accounts (NTTA) for eight EU countries for which both NTA and NTTA results are calculated. The NTA and NTTA results enable us to comprehensively measure the main characteristics of intergenerational relations and to link them with typical characteristics of different welfare regimes.

The most widely used Esping‑Andersen’s (1990) typology of welfare regimes distinguishes between conservative, liberal, and social‑democratic welfare regimes. Moreover, researchers usually separate Mediterranean countries from other conservative countries by adding the Meditterranean regime (Leibfried, 1993). The majority of countries are classified into different regimes when different indicators/methods are used, whereas some countries are constantly classified into the same regime and can be defined as regime prototypes (Ferragina & Seeleib-Kaiser, 2011). In this paper, the connection between inter-age reallocation and welfare regimes is descriptively presented for the prototypes of different welfare regimes. Next, for all 10 analysed countries, we calculate values of five different indicators based on NTA and NTTA results that, in our opinion, capture the main characteristics of different welfare regimes. The first three indicators measure the importance of publicly provided welfare relative to the welfare provided through the familial system for the young (market transfers and transfers in the form of unpaid household work) or through the market in the form of ABR for the elderly. The fourth and fifth indicators measure women’s balance between paid and unpaid work. Subgroups of countries are distinguished based on their high, medium, or low values of indicators.

Our results show that the dependency of the young is financed by private family transfers to a higher extent than by public transfers. The traditional role of the family is especially emphasized in Mediterranean countries, whereas children in social‑democratic countries depend more extensively on the state. Dependency of the elderly is mainly financed by public transfers, the only exceptions are the UK and Germany, where private ABR prevail. Based on the first three indicators, measuring the dependency financing of the young and the elderly, we show a clear association between inter-age reallocation and welfare regimes. The welfare state is strongest in social‑democratic countries and weakest in liberal countries. Continental countries (including Medditeranean countries) fall in between. However, we identify three main exceptions. First, Austria falls more into a social‑democratic rather than a conservative regime. The second exception is Germany, which is recognized as a liberal rather than a conservative country. France is the third exception, because its significant difference from Mediterranean countries is identified when net private transfers in the form of unpaid household work are included. We also claim that the gender dimension should be taken into account when classifying countries into welfare regimes. By including measures of gender equality using NTA and NTTA results, the classification of some countries changes substantially. First, the similarity between Germany and Austria is clearly recognised; secondly, France becomes more similar to the other conservative and Mediterranean countries. Based on the values for all five indicators, we classify countries into three different groups: social‑democratic (Finland, Hungary, Slovenia, and Sweden), conservative (Austria, France, Italy, and Spain), and liberal (Germany and the United Kingdom). Germany represents the main exception, because, based on our results, it belongs more to a liberal than to a conservative regime.

Presented in Session 1124: Ageing and Intergenerational Relations