The impact of social security wealth on the distribution of wealth in the European Union

Abstract

The ageing of society means that public pension systems are becoming increasingly important. This study evaluates the influence of public pension entitlements on wealth inequality among pensioners. A novel data source - the Eurosystem Household Finance and Consumption Survey – is used to compare the impact of the public pension system on wealth inequality in 19 European countries. Findings indicate that in all investigated countries, social security wealth reduces wealth inequality. Augmented wealth inequality is ca. 30% lower than private wealth inequality. This estimate refers to the population of pensioners, while in the whole population the equalizing impact of public pension systems may be weaker. Social security wealth mitigates not only wealth inequality measured at the country level, but also wealth inequality in the whole European Union.