Social security wealth reduces wealth inequality in the EU, new study finds

The ageing of society means that public pension systems are becoming increasingly important. What is the impact of public pension entitlements on wealth inequality among pensioners?

Although for a majority of households public pension entitlements are the most valuable asset, it’s still difficult to estimate their value and assess the impact of social security wealth on wealth distribution. Existing litterature covers almost exclusively developed economies, where social security systems are usually progressive. And the availability of cross-country studies is also very low.

Using new data, this paper fills this gaps and compares the impact of the public pension system on wealth inequality in 19 European countries. Key findings are:

• Social security wealth reduces wealth inequality
• However, there is great variation in the strength of the equalizing power of the public pension system: the impact of social security wealth on (augmented) wealth inequality is strongest in Germany, Austria, the Netherlands, and Estonia, while it is lowest in Greece, Slovenia, and Luxembourg
• Countries where public pension systems mitigate wealth inequality to the greatest extent tend to have high private wealth inequality
• Social security wealth does not invalidate the European wealth hierarchy: Western Europe is richer not only in private wealth terms, but also in social security wealth terms

AUTHORS

• Marcin Wroński

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