Van der Lecq, Rivera-Rozo & Steenbeek: National culture and the configuration of public pensions

ABSTRACT:

This paper explores the determinants of the configuration of public pension plans. It argues that that the cultural background of a country is related to the level of intragenerational redistribution in public pension plans. The level of intragenerational redistribution is measured by Krieger and Traub’s (2013) ‘Bismarckian factor’. Our research hypotheses are tested empirically using cultural dimensions as developed by Hofstede (2001) and data across 25 countries. While the sample is limited, the results are in line with our hypotheses. Uncertainty avoidance appears to have a significant, positive association with the Bismarckian factor (low intragenerational redistribution in public pensions), whereas the relationship with individualism is negative (high intragenerational redistribution). Moreover, a positive association is found between the Bismarckian factor and inflation shocks in the first half of the 20th century and financial markets losses during the Great Depression. The results are robust to the inclusion of different control variables, the use of alternative measures of the configuration of public pensions, and cultural dimensions.

 

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