Human Capital Investment and the Sustainability of Public Transfer Systems Across Europe An Evaluation based on National Transfer Accounts

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...

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Bibliographic Details
Published inJournal of population ageing Vol. 12; no. 4; pp. 427 - 452
Main Authors Hammer, Bernhard, Prskawetz, Alexia, Gál, Róbert I., Vargha, Lili, Istenič, Tanja
Format Journal Article
LanguageEnglish
Published Dordrecht Springer Netherlands 01.12.2019
Subjects
Aging
Demography
Geriatrics/Gerontology
Medicine/Public Health
Social Sciences
Sociology
Human capital
Public transfers
National transfer accounts
Generational contract
Sustainability
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Summary: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.
ISSN:1874-7884
1874-7876
DOI:10.1007/s12062-018-9224-8