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.
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.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
References
Attias-Donfut, C., & Wolff, F.-C. (2000). Complimentary between private and public transfers. In: S.␣Arber, & C. Attias-Donfut (Eds.), The myth of generational conflict. The family and state in ageing societies. London: Routledge.
Arrondel, L., & Masson, A. (2005). Altruism, exchange or indirect reciprocity: What do the data on family transfers show? In: J. Ythier, & S. Kolm (Eds.), Handbook on the economics of giving, reciprocity and altruism. North-Holland: Elsevier.
Barro, R. J. (1978). The impact of social security on private saving. Evidence from U.S. time series (pp. 1–36). Washington, DC: American Enterprise Institute.
Barro, R. J. (1974). Are government bonds net wealth? Journal of Political Economy, 82, 1095–1117.
Becker, G. (1974). A theory of social interactions. Journal of Political Economy, 82, 1063–1093.
Bernheim, D., Shleifer, A., & Summers, L. (1985). The strategic bequest motive. Journal of Political Economy, 93, 1945–1076.
Bhaumik, S. K. (2001). Intergenerational transfers: The ignored role of time. MPIDR Working Paper 2001–008, Rostock: Max-Planck Institute for Demographic Research.
Börsch-Supan, A., Reil-Held A., & Schnabel R. (2002). Household savings in Germany. In: A.␣Börsch-Supan (Hg.), Life cycle savings and public policy – a cross national study of six countries. Academic Press, New York.
Börsch-Supan, A., & Wilke, C. B. (2004). The German public pension system: How it was, how it will be, NBER Working Paper No. 10525, National Bureau of Economic Research.
Braun R., Burger, F., Miegel, M., Pfeiffer, U., & Schulte, K. (2002). Erben in Deutschland. Köln: Deutsches Institut für Altersvorsorge (DIA).
Cox, D. (1990). Intergenerational transfers and liquidity constraints. Quarterly Journal of Economics, 105, 187–217.
Cox, D. (1987). Motives for private income transfers. Journal of Political Economy, 95, 508–546.
Cox, D., & Jakubson, G. (1995). The connection between public transfers and private interfamily transfers. Journal of Public Economics, 57, 129–67.
Cox, D., & Jeminez, E. (1992). Social security and private transfers in developing countries: The case of Peru. The World Bank Economic Review, 6, 155–169.
Croda, E. (1999). Sharing the wealth: An empirical analyis of income shocks and intra-family transfers in Germany. Vierteljahreshefte zur Wirtschaftsforschung Heft, 2, 184–190.
Daatland, S. O. (2004). Comparative perspectives on the support of older people Mimeo: State, market, and family contributions in an European context.
Disney R., & Johnson P. (eds.), (2001). Pension systems and retirement income across OECD countries. Cambridge, London: MIT-Press.
Federal Statistical Office Germany (2003). Bevölkerung Deutschlands bis 2050, Wiesbaden.
Greene, W. (1997). Econometric analysis. Upper Saddle River, NY: Prentice Hall
Guiso, L., & Jappelli, T. (1991). Intergenerational transfers and capital market imper-fections, European Economic Review, 35, 102–120.
Haider, S., & McGarry, K. (2005). Recent Trends in Resource Sharing among the Poor, NBER Working Paper 11612, National Bureau of Economic Research, Cambridge.
Heckman, J. (1979). Sample selection bias as a specification error. Econometrica, 47, 153–162.
Jensen, Robert T. (2003). Do private transfers displace’ the benefits of public transfers? Evidence from South Africa. Journal of Public Economics, 88, 89–112.
Jürges, H. (1999). Parent-child-transfers in Germany: A study of magnitude and motivations, Zeitschrift für Wirtschafts- und Sozialwissenschaften, 119(3), 429–453.
Kohli, M. (1998). Public solidarity between generations: Historical and comparative elements. Free University of Berlin, Research Group on Ageing an the Life Course, Research Report 39.
Kohli, M., Künemund, H., Motel, A., & Szydlik, M. (2000a). Generationenbeziehungen. In: M.␣Kohli, und H. Künemund (Hg.), Die zweite Lebenshälfte. Gesellschaftliche Lage und Partizipation im Spiegel des Alters-Survey. Leske + Budrich, Opladen.
Kohli, M., Künemund, H., Motel, A., & Szydlik, M. (2000b). Intergenerational transfers in East and West Germany. In: S. Arber, & C. Attias-Donfut (Eds.), The myth of generational conflict. The family and state in ageing societies (pp. 88–99). London: Routledge.
Kotlikoff, L. J., & Spivak, A. (1981). The family as an incomplete annuties market. Journal of Political Economy 89, 372–91.
Künemund, H. (2002). Sozialstaatliche Leistungen und Familienbeziehungen im Alter – Verdrängung oder Ergänzung? In: G. M. Backes, & W. Clemens, (Hrsg.), Zukunft der Soziologie des Alter(n)s. 167–181? Opladen: Leske + Budrich.
Künemund, H., & Rein, M. (1999). There is more to receiving than needing: theoretical arguments and empirical explorations of crowding in and crowding out. Ageing and Society, 19, 93–121.
Lafferere, A., & Wolff F.-C. (2005). Microeconomic models of family transfers. In: S. Kolm, J.␣M.␣Ythier (Eds.), Handbook of the economics of giving, altruism and reciprocity. Elsevier.
Motel, A. (1997). Leistungen und Leistungspotentiale älterer Menschen. Finanzielle Leistungen der älteren an ihre Kinder. In: D. Grunow, S. Herkel und H. Hummell (Hg.) Leistungen und Leistungspotentiale älterer Menschen. Bilanz und Perspektiven des intergenerationalen Lastenausgleichs in Familie und sozialem Netz. Duisburger Beiträge zur Soziologischen Forschung Nr. 2/1997, 16–30.
Motel, A., & Szydlik, M. (1999). Private Transfers zwischen den Generationen. Zeitschrift für Soziologie, 28, 3–22.
Motel-Klingebiel, A., Tesch-Römer, C., & von Kondratowitz, H.-J. (2003). The Quantitative Survey. In: A. Lowenstein, & J. Ogg (Hrsg.), OASIS – Old Age and Autonomy: The role of service systems and intergenerational family solidarity. Final report to the European Commission (pp.␣63–101). Haifa: Haifa University.
Reil-Held, A. (2002). Die Rolle intergenerationaler Transfers in Einkommen und Vermögen der älteren Haushalte in Deutschland. MATEO, Universität Mannheim.
Schnabel, R. (2001). The Golden Years of Social Security - Life-cycle Income, Pensions and Savings in Germany”, SFB 504 Discussion Paper 99–40, University of Mannheim.
Schoeni, Robert F. (2002). Does unemployments insurance displace familial assistance? Public Choice, 110, 99–119.
Schokkaert, Erik (2005). The empirical analysis of transfer motives. In: S. Kolm, J. M. Ythier (Eds.), Handbook of the economics of giving, altruism and reciprocity, Elsevier.
Szydlik, M (2000). Lebenslange Solidarität? Generationenbeziehungen zwischen erwachsenen Kindern und Eltern. Opladen: Leske + Budrich.
Szydlik, M. (2004). Inheritance and inequality: Theoretical reasoning and empirical evidence. European Sociological Review, 20(1), 31–45.
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.
Author information
Authors and Affiliations
Corresponding author
Appendix
Appendix
Table 3 Sample description: summary statistics of independent and explanatory variables (West)
Variables | Mean | Standard deviation | Minimum | Maximum |
|---|---|---|---|---|
Age | 73.9 | 5.5 | 65 | 85 |
Household size | 1.4 | 0.5 | 1 | 2 |
Female | 0.47 | 0.5 | 0 | 1 |
Married | 0.42 | 0.5 | 0 | 1 |
Never married | 0.09 | 0.29 | 0 | 1 |
Widowed | 0.36 | 0.48 | 0 | 1 |
Divorced | 0.10 | 0.3 | 0 | 1 |
Living separately | 0.01 | 0.12 | 0 | 1 |
Disposable income | 40877 | 26166 | 5156 | 394896 |
Disposable income net of transfers | 40080 | 31065 | 2000 | 394896 |
Share of public transfers in disposable income | 82.8 | 20.4 | 0 | 100 |
Financial Wealth | 63103 | 129559 | −146215 | 3363594 |
Homeowner | 0.44 | 0.49 | 0 | 1 |
Table 4 Determinants of transfer giving (West)
Heckman | |||
|---|---|---|---|
Regression equation (transfer amount) | Selection equation | Total derivatives (dy/dx) | |
Age | 0.13 (1.25) | −0.14 (1.89) | −0.36 (−1.72) |
Age2 | −0.00 (0.99) | 0.00 (1.87) | 0.00 (1.78) |
Female | −0.38** (4.66) | 0.17** (3.31) | 0.32*** (2.11) |
Never married | 0.31** (2.63) | −0.17* (2.29) | −0.37*** (−1.66) |
Widow | 0.41** (4.72) | 0.17** (2.96) | 0.82*** (4.89) |
Divorced | 0.39** (3.49) | −0.15* (2.19) | −0.27*** (−1.28) |
Separated | 1.06** (5.08) | 0.00 (0.00) | 0.67*** (1.55) |
log (disposable income) | 0.48** (7.48) | 0.52** (12.61) | 2.00 (16.53) |
log(public transfers) | 0.01 (0.20) | 0.06** (2.72) | .21 (3.22) |
Financial wealthtdm | 0.00 (0.96) | −0.00 (0.37) | −0.00 (−0.11) |
Homeowner | 0.09 (1.77) | 0.16** (4.74) | 0.59*** (5.93) |
Constant | −2.93 (0.72) | −0.79 (0.29) | |
Observations | 6370 | 6370 | |
Wald χ2(11) | 185.68 | ||
Rho | −.80 (0.02) | ||
Table 5 Determinants of transfer receiving (West)
Heckman | |||
|---|---|---|---|
Regression equation (transfer amount) | Selection equation | Total derivatives (Dy/dx) | |
Age | 0.27 (1.21) | −0.00 (0.04) | 0.019 ( 0.15) |
Age2 | −0.00 (1.22) | 0.00 (0.01) | −0.00 (−0.17) |
Female | −0.09 (0.43) | 0.25** (3.34) | 0.32*** ( 3.17) |
Never married | −0.58 (1.91) | −0.49** (4.62) | −0.52*** (−6.91) |
Married | |||
Widowed | −0.24 (0.98) | −0.42** (5.05) | −0.55*** (−5.55) |
Divorced | 0.43 (1.91) | −0.09 (0.93) | −0.07*** (−0.63) |
Living separately | 0.79* (2.50) | 0.34* (2.19) | 0.68*** ( 2.03) |
Log (disposable income) | −0.13 (0.66) | −0.51** (9.61) | −0.68 (−9.80) |
Log (public transfers) | −0.18** (2.77) | −0.11** (4.24) | −0.17 (−4.64) |
Financial wealth (in TDM) | 0.00** (4.79) | 0.00** (3.78) | 0.001 ( 4.85) |
Homeowner | 0.40** (3.59) | −0.14** (2.91) | −.14*** (−2.30) |
Constant | 1.00 (0.12) | 5.46 (1.48) | |
Observations | 6370 | 6370 | |
Wald χ2(11) | 104.96 | ||
Rho | 0.013 (0.29) | ||
Rights and permissions
About this article
Cite this article
Reil-Held, A. Crowding out or crowding in? Public and private transfers in Germany. Eur J Population 22, 263–280 (2006). https://doi.org/10.1007/s10680-006-9001-x
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s10680-006-9001-x