From Family Culture to Welfare State Design

We study how family culture affected the initial welfare state design. Our theoretical framework shows that pre-existing institutions — namely inheritance rules — shaped the within family intergenerational transmission of resources. This organization is embedded in the family culture that later affected the design of pension systems. Countries with equalitarian inheritance rules acquired a non-individualistic family culture that induced the adoption of generous Bismarckian pension systems, whereas non-equalitarian inheritance rules nurtured family independence and led to Beveridgean (safety net) pension systems. Cross countries analyses using historical inheritance rules support these predictions, and results are robust to controlling for alternative legal, religious, demographic, economic and political explanations. Evidence from individual data confirm these findings: US citizens whose ancestors came from countries featuring equal inheritance rules prefer to rely on the government as a provider of old age security through generous retirement benefits.