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

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

Abstract

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.

Keywords

Public transfers Human capital Sustainability National transfer accounts Generational contract 

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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

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