Crowding out or crowding in? Public and private transfers in Germany

Original Paper

Abstract

Intergenerational support exchanges are of particular interest in the ageing populations of Europe. This paper investigates the relationship between private and public financial transfers to and from elderly people using data from Germany. First, the determinants of private transfer giving are analysed. We find a positive correlation between the amount of public transfers elderly people receive and the private transfers they give. This mechanism can be interpreted as a detour system, an inefficient backflow of pay-as-you-go financed pensions to the young generation. On the other hand, we find for the much smaller group of elderly people who receive private financial support, that these transfers are negatively correlated with the public transfers they receive. Therefore, the “crowding out” hypothesis cannot be rejected and it is possible that public transfers to older people by the German welfare state may displace private financial support which they would otherwise have received.

Keywords

Intergenerational transfers Crowding out Public pensions Germany 

Substituts ou compléments? Transferts publics et privés en Allemagne

Résumé

Les échanges intergénérationnels de solidarité sont d’un intérêt particulier dans l’étude des populations vieillissantes de l’Europe. Cet article explore la relation entre les transferts financiers privés et publics en provenance des personnes âgées vivant en Allemagne, et à destination de ces mêmes personnes. Une corrélation positive est observée entre le volume des transferts publics que les personnes âgées reçoivent et celui des transferts privés qu’elles distribuent. Ce mécanisme peut être interprété comme un système de détournement, un retour inefficace des retraites en direction des jeunes générations qui les financent. D’autre part, il apparaît que, parmi le petit groupe de personnes âgées qui reçoivent des transferts privés, ces transferts sont négativement corrélés avec les transferts publics dont elles sont bénéficiaires. C’est pourquoi l’hypothèse selon laquelle les transferts publics se substituent aux transferts privés ne peut être rejetée, et c’est pourquoi est possible que les transferts publics aux personnes âgées par l’état providence en Allemagne puissent prendre la place des transferts privés qu’ils auraient pu recevoir en l’absence de ces transferts publics.

Mots-clés

transferts inter-générationnels « crowding out » retraites de l’état Allemagne 

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Notes

Acknowledgement

I want to thank Axel Börsch-Supan, Karsten Hank, Joachim Winter, Hendrik Jürges and the participants of the EAPS/INED workshop in Paris for their valuable comments, especially John Henretta for his discussion and Emily Grundy for all her support. I also wish to thank two anonymous referees and Frans van Poppel for their remarks and Rachel Stuchbury for her efforts. I am grateful to the Gesamtverband der Deutschen Versicherungswirtschaft, the state of Baden-Württemberg and the Deutsche Forschungsgemeinschaft within the Sonderforschungsbereich 504 for financial support.

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Copyright information

© Springer Science+Business Media B.V. 2006

Authors and Affiliations

  1. 1.Mannheim Research Institute for the Economics of Aging (MEA)University of MannheimMannheimGermany

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