In many countries of the world, population ageing has been accompanied by an increase in welfare spending. Welfare states comprise public programmes aimed at increasing the well-being of the citizens through the provision of insurance against various risks, such as unemployment, sickness, disability, poverty and old age. In most OECD countries, the pension system constitutes the main welfare programme, absorbing more than 50 per cent of all welfare spending. In 2010, public pension spending ranged from 1.1 per cent of GDP in the Philippines to 14 per cent in Italy, with an average spending of 7.4 per cent of GDP among developed economies, compared to 4.1 per cent in the 21 developing countries for which World Bank data are available. These pension systems differ a great deal, even in the richest of the developed economies. Countries characterized by Bismarckean earnings-related public pension systems spend more (13.5 per cent in France, 10.2 per cent in Germany) than those featuring Beveridgean safety net systems (3.1 per cent in Australia, 4.9 per cent in the USA). These differences depend on several factors, such as the degree of pension coverage in the population, the generosity of the pension benefits and the demographic composition of the country. The welfare states have been classified into different types, according to their level of social spending and to their composition in the different programmes, such as pension, health care, labour market and family policies (see Esping-Andersen, 1999).
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