Historical Reconstruction of the Emergence of the Welfare State

Robert Gal , Hungarian Demographic Research Institute
Miguel Sanchez-Romero, TU Wien and IIASA
Pieter Vanhuysse, University of Southern Denmark

Based on the concepts of asymmetric statistical visibility (Gal, Vanhuysse and Vargha 2018) and transfer conversion (Vanhuysse, Medgyesi and Gal 2023) and building on the models of Sanchez-Romero, Lee, and Prskawetz (2020) and Sanchez-Romero, Schuster, and Prskawetz (2024), this paper applies a complex model of employment, wages, demography, household structure, growth, and time allocation to reconstruct the age composition of familial and public transfers. The model is fed with current age profiles, and retrospective data on demography, wages and national accounts aggregates. We use Swedish data for its exceptional qualities; the results reflect the historical realities of a Sweden-like country (but not exactly Sweden, due to the limits of theoretical reconstruction). The results extend our previous understanding of how the welfare state might have emerged. There appears to be a near-complete transfer conversion in old age, whereby the support of cohabiting older parents by their grown-up children is replaced by taxes collected from the generation of grown-up children and redistributed among the generation of now separately living parents. On the other hand, the taxes paid by the working-age generation only added, though quite significantly, to, but did not replace, familial transfers flowing from working-age parents to children. These observations contribute to answering the question of whether the rise of the welfare state is the emergence of something new or the conversion of something old into something new.

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 Presented in Session P7. Education, Labor Market, and Economic Issues