The impact of the public pension system on wealth inequality. The distribution of augmented wealth in Poland

ABSTRACT

Public pension wealth is an important component of a household’s wealth portfolio. However, due to data scarcity, it is usually omitted in the research on household wealth. The literature on augmented wealth is limited to developed economies. We use a novel data source to estimate the distribution of public pension wealth and augmented wealth in Poland. We assess the impact of education-related mortality differential on the value of public pension wealth. Our research sample includes pensioners and workers near retirement. Therefore, we measure the impact of public pension wealth on wealth distribution among those who already profit from their public pension wealth, or will profit from it soon. Moreover, the value of their public pension wealth is stable and robust, while the value of public pension entitlements of the working-age population may change rapidly due to pension system reforms. The public pension system significantly decreases wealth inequality. The Gini index equals 0.5007 for private wealth distribution and 0.3472 for augmented wealth distribution. Decomposition techniques confirm an equalizing impact of public pension wealth on the pension system. The impact of education-related mortality differential on the value of public pension wealth exists at the individual level, but it diminishes at the household level.

KEYWORDS:

• Wealth inequality
• augmented wealth
• public pension system
• Poland

JEL CLASSIFICATION:

• D31
• D63
• H55

Disclosure statement

No potential conflict of interest was reported by the author.

Additional information

Funding

This work was supported by the National Science Centre[decision DEC −2020/36/T/HS4/00248].