National culture and the configuration of public pensions

This paper explores the determinants of the configuration of public pension plans. It is argued 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 both cultural dimensions as developed by Hofstede (2001) and a group of country characteristics. The empirical 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. 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, and the employment of an instrumental variables approach.