The place of social cohesion in policy design: Lessons from the evolution of pension policy instruments mix in OECD countries

Abstract

OECD countries are grappling with a policy design dilemma, as they strive to balance fiscal sustainability with the increasing demands on the welfare state. This study introduces a new perspective on policy design that integrates the two elements of “social cohesion,” comprising government trust and civic engagement. The study aims to find empirical evidence on how social cohesion has influenced the policy instruments mix in social and pension policy design across 30 OECD member countries from 2010 to 2020. The System Generalized Method of Moments was employed to address endogeneity issues at the country level and to account for policy dynamics. At the macro policy level, social cohesion appears to intensify the social policy dilemma between government fiscal austerity and public popularity. However, the findings indicate that at the meso level of pension policy, the two elements of social cohesion exhibit dual roles both counteractive and complementary roles in the policy instruments mix. This involves identifying the intersection of state‐citizen dynamics in social policy and pension design. The art of the policy instruments mixed within the framework of social cohesion provides valuable insights into resolving policy design dilemmas by achieving a balance and harmony between government and citizens.