Project description
Balancing fiscal sustainability and political feasibility in welfare states
Welfare states are essential for shielding citizens from economic risk, yet declining fertility and rising longevity puts growing strain on public finances. At the same time, voters’ strong attachment to existing entitlements makes reform politically difficult. This creates a central challenge: ensuring long-term sustainability while maintaining political feasibility. The ERC-funded RESTATE project is developing a novel framework for welfare state design that incorporates political constraints, intergenerational redistribution and legacy commitments. Covering social security, public debt and public investment, it combines economic theory, quantitative modelling and empirical analysis to identify reforms that are both effective and implementable. The project will advance our understanding of welfare state dynamics and offer actionable guidance for policymakers adapting systems to ageing societies.
Objective
Initially intended to shield individuals from adverse macroeconomic shocks, welfare programs such as social security have grown significantly over time, evolving into politically entrenched entitlements. Demographic changes, including declining fertility rates and increasing life expectancy, have further fueled their expansion, raising fiscal pressure. While retrenchment reforms are recognized as essential for economic sustainability, strong public support for welfare programs often renders them politically unviable.
How should an optimal welfare state be designed in a changing world to balance economic sustainability and political viability?
RESTATE will develop a new theoretical framework to rethink the design of an optimal welfare state, accounting for intergenerational redistribution and addressing political frictions that arise from the fiscal authority’s limited ability to enforce participation, thus departing from traditional frameworks that assume mandatory programs. The optimal welfare state must balance a fundamental trade-off between maximizing welfare, incentivizing participation, and honoring entrenched entitlements.
RESTATE will tackle this complex trade-off across diverse fiscal domains explored in three interconnected work packages, combining theoretical and empirical analysis. Work Package 1 will study how optimal social security systems can address the long-term sustainability challenges posed by demographic aging while mitigating political frictions. Work Package 2 will examine the optimal management of public debt, emphasizing its role as a hedge under political limits on raising primary surpluses. Work Package 3 will analyze the role of optimal public investment in securing the fiscal sustainability of social security systems and public debt.
By providing a foundation to address the complex challenges of welfare state design in a changing world, RESTATE will aspire to advance academic debate and equip fiscal authorities with actionable insights.
Fields of science (EuroSciVoc)
CORDIS classifies projects with EuroSciVoc, a multilingual taxonomy of fields of science, through a semi-automatic process based on NLP techniques. See: The European Science Vocabulary.
This project's classification has been human-validated.
CORDIS classifies projects with EuroSciVoc, a multilingual taxonomy of fields of science, through a semi-automatic process based on NLP techniques. See: The European Science Vocabulary.
This project's classification has been human-validated.
Keywords
Project’s keywords as indicated by the project coordinator. Not to be confused with the EuroSciVoc taxonomy (Fields of science)
Project’s keywords as indicated by the project coordinator. Not to be confused with the EuroSciVoc taxonomy (Fields of science)
Programme(s)
Multi-annual funding programmes that define the EU’s priorities for research and innovation.
Multi-annual funding programmes that define the EU’s priorities for research and innovation.
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HORIZON.1.1 - European Research Council (ERC)
MAIN PROGRAMME
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Topic(s)
Calls for proposals are divided into topics. A topic defines a specific subject or area for which applicants can submit proposals. The description of a topic comprises its specific scope and the expected impact of the funded project.
Calls for proposals are divided into topics. A topic defines a specific subject or area for which applicants can submit proposals. The description of a topic comprises its specific scope and the expected impact of the funded project.
Funding Scheme
Funding scheme (or “Type of Action”) inside a programme with common features. It specifies: the scope of what is funded; the reimbursement rate; specific evaluation criteria to qualify for funding; and the use of simplified forms of costs like lump sums.
Funding scheme (or “Type of Action”) inside a programme with common features. It specifies: the scope of what is funded; the reimbursement rate; specific evaluation criteria to qualify for funding; and the use of simplified forms of costs like lump sums.
HORIZON-ERC - HORIZON ERC Grants
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Call for proposal
Procedure for inviting applicants to submit project proposals, with the aim of receiving EU funding.
Procedure for inviting applicants to submit project proposals, with the aim of receiving EU funding.
(opens in new window) ERC-2025-COG
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Net EU financial contribution. The sum of money that the participant receives, deducted by the EU contribution to its linked third party. It considers the distribution of the EU financial contribution between direct beneficiaries of the project and other types of participants, like third-party participants.
35122 Padova
Italy
The total costs incurred by this organisation to participate in the project, including direct and indirect costs. This amount is a subset of the overall project budget.