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The public reallocation of resources across age: a comparison of Austria and Sweden

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Abstract

There is a strong interdependency between public transfers and the shape of the economic lifecycle because these transfers facilitate and enable the decoupling of production and consumption over long time periods, most notably in childhood and retirement. The design of public transfers obviously influences the production and consumption and consequently also the degree of economic dependency of children and the elderly. We propose economic dependency ratios which are based on age-specific consumption and labour income or age-specific public contributions/benefits, respectively, illustrating them in a comparison of Austria and Sweden. Although these two countries are very similar economies in terms of production, income and the size of the public sector, there are remarkable differences in the design of public transfers, in their distribution over age-groups and consequently in the shape of the average economic lifecycle. Using the economic dependency ratios we show that the financial sustainability of the public transfer system depends beside the demographic developments strongly on its design: the Swedish system collects the contributions from a wider range of age groups, transfers a smaller share to the elderly and provides more support to younger generations, supporting them to invest in children of their own. These characteristics have a positive effect on the sustainability of the Swedish system: although in Sweden there is a larger share of the population in the age group 60+, the total economic dependency of elderly persons is lower.

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Notes

  1. All monetary values are given in Purchasing Power Standards (PPS): PPS are an artificial currency with the same purchasing power in each country. One PPS-Euro has the average purchasing power of one Euro in the European Union (European Communities 2008).

  2. Source: Eurostat, Government finance statistics.

  3. Current transfers include the flows captured by the current accounts of the SNA as well as the current (non-capital) transfers within the households.

  4. Net property income received from the ROW is the net-income receivable by the domestic institutional unit for putting a financial asset or a tangible non-produced asset at the disposal of another non-domestic institutional unit. It consists of interest, dividends, rent ... See: OECD—Glossary of Statistical Terms.

  5. The private sectors consist of households, financial- ans non-finacial corporations and non-profit institutions serving households.

  6. Source: EUROSTAT.

  7. Data available from: http://dx.doi.org/10.1787/888932370341 (accessed April 10, 2013).

  8. Source: EUROSTAT, Part-time work as percentage of total employment 2010.

  9. Source: EUROSTAT, Fertility 2010.

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Acknowledgments

This work was supported by the Austrian Science Fund (Project I 347-G16 “National Transfer Accounts and intergenerational redistribution in European institutional settings”) and by the Vienna Chamber of Commerce (Wirtschaftskammerpreis 2011). We also thank Werner Richter for the English proof reading.

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Authors and Affiliations

  1. Institute of Mathematical Methods in Economics, Vienna University of Technology, Argentinierstrasse, 8/4/105-3, 1040, Vienna, Austria

    Bernhard Hammer & Alexia Prskawetz

  2. Vienna Institute of Demography, Austrian Academy of Science, Vienna, Austria

    Alexia Prskawetz

  3. Wittgenstein Centre for Demography and Global Human Capital, Vienna, Austria

    Alexia Prskawetz

Authors
  1. Bernhard Hammer
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  2. Alexia Prskawetz
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Correspondence to Bernhard Hammer.

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Hammer, B., Prskawetz, A. The public reallocation of resources across age: a comparison of Austria and Sweden. Empirica 40, 541–560 (2013). https://doi.org/10.1007/s10663-013-9219-x

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  • DOI: https://doi.org/10.1007/s10663-013-9219-x

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