Public/Private Pension Mix, Income Inequality, and Poverty Among the Elderly in Europe: An Empirical Analysis Using New and Revised OECD Data

Abstract

Prior studies have suggested that higher public pensions are associated with lower income inequality among the elderly, whereas the reverse is true for private pensions. Van Vliet et al. (2012) empirically test whether relative shifts from public to private pension schemes entail higher levels of income inequality among the elderly using panel data from the OECD SOCX and the EU-SILC databases. Contrasting earlier empirical studies using either cross-sectional or time-series data, they do not find evidence that shifts from public to private pension provision are associated with higher levels of income inequality or poverty among elderly. The aim of the current paper is to extend the analysis of Van Vliet et al. by 1) adding additional countries, 2) adding additionally available years, and 3) using revised OECD SOCX data. In contrast to Van Vliet et al., we find that a greater relative importance of private pensions is associated with higher levels of income inequality and poverty among elderly. A central explanation of the difference in conclusions stems from revision of OECD SOCX data.

Keywords: income inequality, poverty, public/private-mix, elderly, welfare state, pensions