Human Capital Investment and the Sustainability of Public Transfer Systems Across Europe

An Evaluation based on National Transfer Accounts
  • Bernhard HammerEmail author
  • Alexia Prskawetz
  • Róbert I. Gál
  • Lili Vargha
  • Tanja Istenič


We evaluate the sustainability of the public transfer systems in 24 EU countries using a new cohort-specific indicator, the Human Capital Investment Gap (HKIG). The indicator measures for a certain cohort the difference between the public benefits in old age and the public contributions of the child generation. Calculating the HKIG for the cohort born in 1950, we show that in none of the analyzed countries the contributions of the child generation will be sufficient to finance the old age benefits of the 1950 cohort, given the age- and employment-specific transfer pattern observed in 2010. This result holds for most of the countries even when assuming very optimistic employment scenarios. The decomposition of the HKIG into its components indicates that the cross-country differences in the HKIG are mainly driven by the level of public contributions and benefits, while retirement age and employment rates play a comparably minor role.


Public transfers Human capital Sustainability National transfer accounts Generational contract 


  1. Auerbach, A.J., Gokhale, J., Kotlikoff, L.J. (1991). Generational accounts–a meaningful alternative to deficit accounting. National Bureau of Economic Research; Working Paper No. 3589.Google Scholar
  2. Blanchard, O.J. (1990). Suggestions for a new set of fiscal indicators. OECD Economics Department Working Papers.Google Scholar
  3. Blanchard, O.J., Chouraqui, J.-C., Hagemann, R., Sartor, N. (1990). The sustainability of fiscal policy: new answers to an old question. OECD Economic Studies No 15.Google Scholar
  4. Bonin, H. (2001). Generational accounting: theory and application. Berlin: Springer.CrossRefGoogle Scholar
  5. Bonin, H., & Raffelhüschen, B. (1999). Public finances in the european union: is convergence sustainable? Discussion papers. Institut für Finanzwissenschaft, Unversität Freiburg.Google Scholar
  6. Cardarelli, R., Sefton, J., Kotlikoff, L.J. (2000). Generational accounting in the UK. The Economic Journal, 110(467), 547–574.CrossRefGoogle Scholar
  7. Collins Dictionary of Law. (2006). Contract. (n.d.). Retrieved July 28 2016 from
  8. Economic and Financial Affairs. (2016). Fiscal sustainability report. European Economy Institutional Paper 18.Google Scholar
  9. European Commission. (2015). The 2015 aging report: economic and budgetary projections for the 28 EU Member States (2013–2060). European Economy, 3.Google Scholar
  10. Gál, R.I., & Monostori, J. (2017). Economic sustainability and intergenerational fairness: a new taxonomy of indicators. Intergenerational Justice Review, 11(2), 77–86.Google Scholar
  11. Gál, R.I., Vanhuysse, P., Vargha, L. (2017). Pro-elderly welfare states within pro-child societies. Journal of European Public Policy. Forthcoming. Working paper version download from:
  12. Gallopin, G.C. (2005). Indicators and their use: information for decision-making. In Redclift, M. (Ed.) Sustainability: critical concepts in the social sciences, (Vol. 3 pp. 257–273). Routledge.Google Scholar
  13. Goldstein, J.R., & Kluge, F. (2016). Demographic pressures on european unity. Population and Development Review, 42(2), 299–304.CrossRefGoogle Scholar
  14. Hammer, B., Loichinger, E., Prskawetz, A. (2016). Projections of the labour force by age, gender and highest level of educational attainment until 2050. Public Deliverable of the AGENTA Project. Download from
  15. Istenič, T., Šeme, A., Hammer, B., Lotrič Dolinar, A., Sambt, J. (2016). The European NTA manual. AGENTA Public Deliverable. Download from: Accessed 13 Sept 2016.
  16. Langenus, G. (2006). Fiscal sustainability indicators and policy design in the face of aging. National Bank of Belgium Working Paper No. 102.Google Scholar
  17. Lee, R., & Mason, A. (Eds.). (2011). Population aging and the generational economy: a global perspective. Cheltenham: Edward Elgar Publishing.Google Scholar
  18. Loichinger, E., Hammer, B., Prskawetz, A., Freiberger, M., Sambt, J. (2017). Quantifying economic dependency. European Journal of Population, 33(3), 351–380.CrossRefGoogle Scholar
  19. Miller, T. (2011). The rise of the intergenerational state: aging and development. In Lee, R., & Mason, A. (Eds.) Population aging and the generational economy: a global perspective, (pp. 161–184). Edward Elgar Pub.Google Scholar
  20. Raffelhüschen, B. (1999). Generational accounting in Europe. The American Economic Review, 89(2), 167–170.CrossRefGoogle Scholar
  21. Raffelhüschen, B., & Gokhale, J. (2000). Population aging and fiscal policy in europe and the united states. CESifo Working Paper Series No. 237.Google Scholar
  22. Seshamani, M., & Gray, A. (2004). Ageing and health-care expenditure: the red herring argument revisited. Health Economics, 13(4), 303–314.CrossRefGoogle Scholar
  23. SNA. (2009). System of National Accounts 2008. European Communities, International Monetary Fund, Organisation for Economic Co-operation and Development, United Nations and World Bank. Download from: Accessed 20 Jan 2014.
  24. UN. (2013). National transfer accounts manual: measuring and analysisng the generational economy. United Nations, Department of Economic and Social Affairs, Population Division.Google Scholar
  25. Whyte, S.R., Alber, E., Van der Geest, S. (2008). Generational connections and conflicts in Africa: an introduction. In Alber, E., Van der Geest, S., Whyt, S.R. (Eds.) Generations in Africa: connections and conflicts, (pp. 1–23). Germany: Lit Verlag Berlin.Google Scholar
  26. Wittgenstein Centre for Demography and Global Human Capital. (2015). Wittgenstein Centre Data Explorer Version 1.2. Available at:
  27. Zweifel, P., Felder, S., Werblow, A. (2004). Population ageing and health care expenditure: new evidence on the “red herring”. The Geneva Papers on Risk and Insurance Issues and Practice, 29(4), 652–666.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media B.V., part of Springer Nature 2018

Authors and Affiliations

  1. 1.Wittgenstein Centre for Demography and Global Human Capital (IIASA, VID/ÖAW, WU)ViennaAustria
  2. 2.Institute of Statistics and Mathematical Methods in EconomicsTU WienViennaAustria
  3. 3.Hungarian Demographic Research InstituteBudapestHungary
  4. 4.Doctoral School of Demography and SociologyUniversity of PécsPécsHungary
  5. 5.Faculty of EconomicsUniversity of LjubljanaLjubljanaSlovenia

Personalised recommendations