The Popular Response to the Ageing Crisis A Time-Series Cross-Sectional Analysis of the Effects of Demographic Ageing on Individuals’ Support for Welfare State Policy in 13 Advanced Democracies (1996-2016) Oskar Pettersson Supervisor: Marcus Österman Master’s Thesis in Political Science Department of Government Uppsala University Autumn 2020 Page intentionally left blank. Abstract This thesis examines the relationship between demographic ageing, as captured by temporal, within-country variation in the ratio of elderly to the working-age population – the dependency ratio – on citizens’ support for the welfare state. The research problem is vitally relevant considering the worsening demographic structure of advanced democracies, a process that is having considerable ramifications on the possibilities of financing comprehensive welfare states. Using a time-series cross-sectional design, and building on representative survey data from 13 advanced democracies, the thesis specifically assesses the relationship between the dependency ratio, and individual spending preferences towards 1) the welfare state as a whole, as captured by an additive index, 2) education policy, and 3) old-age benefits. It also assesses whether demographic ageing exacerbates attitude differences between age groups, thereby scrutinising some assumptions made previously on the issue of intergenerational cleavages. The thesis uncovers no significant relationship between the dependency ratio and general support for the welfare state. However, the dependency ratio is shown be positively correlated with citizens’ support for education policy, while being instead potentially negatively correlated with support for old-age benefits. The differences between these two policies, in terms of their enjoyed support, are important considering the presumed shift in welfare state priorities towards what is commonly called social investment. Indeed, they indicate that there may be popular support for the type of reform strategies whose purpose is to invest in tomorrow’s diminishing workforce, whereas the support for more compensatory old-age policies may instead be weakening. There are also signs that the positive effect on the support for education policy is lower among older individuals. This evidence is quite interesting considering the previous expectations of deepening intergenerational cleavages as a consequence of demographic ageing, but the weak indications of this development in previous empirical research. Keywords: demographic ageing, dependency ratio, welfare state attitudes, spending preferences, social investment, TSCS, pseudo-panel, cross-level interaction, intergenerational cleavages Word count: 19 213 Acknowledgements I would like to thank Marcus Österman, researcher at the Department of Government, for kindly supervising me during the writing of this master’s thesis in political science. Marcus’ feedback and advice, especially with regards to methods and statistics, have been greatly helpful to me as a thesis student, and I have learned plenty of useful things along the way. While I have admittedly been slow to pick up on your suggestions in certain areas, Marcus, I believe that the end-product turned out quite well in the end. I would also like to thank my fellow student Klara Hvarfner for her kind read-throughs, and her valuable feedback on various parts of the paper. Lastly, I would like to compliment Anders Lindbom, professor at the Institute for Housing and Urban Research, for a number of insights regarding welfare state research that I have gained as a thesis student and as a research assistant – insights that have been quite useful in the process of developing this thesis’ theoretical framework, reflecting on different empirical indicators, and more. Oskar Pettersson, 28th December 2020 Table of Content 1. Introduction ................................................................................................................................... 1 1.1 Problem, Purpose and Research Question ......................................................................... 3 2. Background .................................................................................................................................... 4 2.1. The Demographic Hangover ............................................................................................... 4 2.2. Changing Risks, Changing Welfare States ......................................................................... 6 3. Theoretical Framework ................................................................................................................ 8 3.1. The Case for Analysing Individual Attitudes .................................................................... 8 3.2. Previous Research ................................................................................................................. 9 3.3. Theory and Hypotheses ...................................................................................................... 12 4. Research Design .......................................................................................................................... 18 4.1. A Time-Series Cross-Sectional Approach ....................................................................... 18 4.2. Data and Operationalisations ............................................................................................ 21 4.5. Estimation Strategy ............................................................................................................. 31 4.6. Descriptive Statistics ........................................................................................................... 33 5. Results and Analysis ................................................................................................................... 34 5.1. Demographic Ageing and General Support for the Welfare State .............................. 34 5.2. Demographic Ageing and Support for Specific Welfare Policies ................................ 36 5.3. Exploratory Analyses and Robustness Tests ................................................................... 42 6. Conclusions ................................................................................................................................. 46 7. References .................................................................................................................................... 50 Appendix A: Questionnaire Excerpts and Descriptive Graphs ............................................... 57 Appendix B: Results for Supplementary Variables .................................................................... 65 Appendix C: Results using Continuous Age Variable ............................................................... 71 Appendix D: Results within Income Sub-samples .................................................................... 75 Appendix E: Results with Control for Linear Time-trend ....................................................... 81 Appendix F: Results with Lagged Dependency Ratio (5 years) ............................................... 84 Appendix G: Stata Syntax .............................................................................................................. 87 Tables and Figures Table 1: Pairwise correlations between dependent variables ............................................... 23 Table 2: Dependency ratio at survey years .................................................................................. 28 Table 3: Descriptive statistics for key variables .......................................................................... 33 Table 4: Effect of dependency ratio on general spending preferences ................................... 35 Table 5: Effect of dependency ratio on spending preferences for education ........................ 37 Table 6: Effect of dependency ratio on spending preferences for old-age benefits ............. 41 Figure 1: Spending preferences towards welfare state policies at survey years.................... 24 Figure 2: Dependency ratio in sample countries, 1960-2016 ............................................... 27 Figure 3: Predicted spending preferences for education for different values of DR .......... 38 Figure 4: Marginal effects of dependency ratio on spending preferences for education ..... 39 Oskar Pettersson ∙ The Popular Response to the Ageing Crisis 1 1. Introduction “Crisis we may call a situation with three characteristics: an existing state of affairs has become untenable, or is rapidly becoming so; a new more stable and tenable pattern or arrangement is not known or does not appear practicable […]; and the search for such a viable and practicable pattern, its establishment in practice and the decisions relating to this task all must be carried out under great pressure of time.” (Karl Deutsch, 1981, p. 331) It is certainly no understatement to say that it has been commonplace for welfare state scholars to argue that the welfare states of advanced democracies are, and will be, fundamentally in a state of hardship, distress, or even worse – crisis. Such accounts abound in the literature, and admittedly not without good reason. The favourable circumstances under which modern welfare states emerged – exceptional levels of economic growth, high employment, and rising wages – are indeed things mostly belonging to the past. Adding to these “exogenous forces” (Esping-Andersen, 1990, p. 6) are also the developments of increased globalisation and migration – the implications