Welfare state and social Europe

Torben M Andersen, Joydeep Bhattacharya, Anna Grodecka-Messi, Katja Mann, 05 May 2022

Retirement saving is at the centre of the debate on rising income and wealth inequality. This column studies the role of the pension system in wealth accumulation and distribution in Denmark. The authors find that a pension reform in the late 1980s increased the savings rate and aggregate pension assets significantly by introducing mandated funded pensions. Moreover, it has had an equalising effect on the wealth distribution. The findings illustrate the importance of pension system design for the level and distribution of wealth. 

Maarten De Ridder, Simona Hannon, Damjan Pfajfar, 21 April 2022

An expansion of the federal Pell Grant programme – the largest US scholarship programme that helps lower-income students attend college – has recently been proposed. This column shows that, besides the long-run benefits of making college more affordable, Pell Grants significantly raise local economic activity. Local income rises by 2.4% when Pell Grants increase by 1% of income, far exceeding the effect of, for example, defence spending. For-profit colleges raise tuition fees when grants become more generous, reducing the multiplier effect of grants at these schools. 

Jonas Kolsrud, Camille Landais, Daniel Reck, Johannes Spinnewijn, 22 March 2022

Over the past two decades, many countries have reformed their public pension systems in pursuit of desirable fiscal effects, often by introducing or strengthening incentives for later retirement. However, the welfare effects of such interventions are still poorly understood. Using Swedish administrative data, this column uncovers significant redistributive costs of pension reforms that incentivise later retirement, especially when it comes to incentivising later retirement at very early and late retirement ages. Policymakers should consider not only the fiscal benefits of incentivising later retirement, but also the redistributive costs.

Alan de Bromhead, Ronan Lyons, 15 March 2022

The world is becoming increasingly urban, raising questions about population redistribution and the sustainability of policies aimed at stemming the tide of rural depopulation. This column measures the impact of the world’s first large-scale rural public housing scheme on the long-term dynamics of population change. The authors find that Ireland’s Labourers Acts – which subsidised the construction of nearly 50,000 cottages for agricultural labourers between 1883 and 1915 – helped to reduce depopulation of the countryside but was unable to arrest the decline completely. 

Klaus Adam, 25 February 2022

Inflation reduces economic welfare by distorting demand. But what is the inflation rate that minimises these distortions? Maybe it's a lot higher than our models assume, Klaus Adam tells Tim Phillips.

Read more about this research and download the free DP:
Adam, K, Gautier, E, Santoro, S and Weber, H. 2021. 'The Case for a Positive Euro Area Inflation Target: Evidence from France, Germany and Italy'. CEPR

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