Welfare states as lifecycle redistribution machines: Decomposing the roles of age and socio-economic status shows that European tax-and-benefit systems primarily redistribute across age groups.

Pieter Vanhuysse,Robert I Gal,Marton Medgyesi,Joanna Tyrowicz

doi:10.1371/journal.pone.0255760

Abstract

Social scientists identify two core functions of modern welfare states as redistribution across (a) socio-economic status groups (Robin Hood) and (b) ‘the lifecycle’ (the piggy bank). But what is the relative importance of these functions? The answer has been elusive, as the piggy bank is metaphorical. The intra-personal time-travel of resources it implies is based on non-quid-pro-quo transfers. In practice, ‘lifecycle redistribution’ must operate through inter-age-group resource reallocation in cross-section. Since at any time different birth cohorts live together, ‘resource-productive’ working-aged people are taxed to finance consumption of ‘resource-dependent’ younger and older people. In a novel decomposition analysis, we study the joint distribution of socio-economic status, age, and respectively (a) all cash and in-kind transfers (‘benefits’), (b) financing contributions (‘taxes’), and (c) resulting ‘net benefits,’ on a sample of over 400,000 Europeans from 22 EU countries. European welfare states, often maligned as ineffective Robin Hood vehicles riddled with Matthew effects, are better characterized as inter-age redistribution machines performing a more important second task rather well: lifecycle consumption smoothing. Social policies serve multiple goals in Europe, but empirically they are neither primarily nor solely responsible for poverty relief and inequality reduction.

Highlights

The welfare state as Robin Hood and piggy bank, beyond metaphorWelfare states have evolved since their inception in late nineteenth-century Europe into sizable and resource-consuming institutions
As for net welfare benefits, the analysis of the contributions to the explained variance gives a similar picture to the analysis of coefficients: age is more important, accounting for 24 percent of the total variance in net benefits explained, compared to only 7 percent for socio-economic status
First and foremost, are not status equalizers of sorts, but lifecycle redistribution machines in cross-section. This finding carries multiple wider implications for public policy. It affects the yardsticks we employ in targeting analysis

Summary

Introduction

The welfare state as Robin Hood and piggy bank, beyond metaphorWelfare states have evolved since their inception in late nineteenth-century Europe into sizable and resource-consuming institutions. Welfare states as lifecycle redistribution machines reallocations between age groups in cross-section. We introduce our model and present the three-dimensional distribution surfaces of all cash and in-kind welfare benefits, the taxes that finance them, and the resulting net benefits for 22 European welfare states by SES and age.

Results

Conclusion