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Social Transfers And Income Inequality In Old Age

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  • Robert Brown
  • Steven Prus

Abstract

This paper examines variation in old-age income inequality between industrialized nations with modern welfare systems. The analysis of income inequality across countries with different retirement income systems provides a perspective on public pension policy choices and designs and their distributional implications. Because of the progressive nature of public pension programs, we hypothesize that there is an inverse relationship between the quality of public pension benefits and old-age income inequality—that is, countries with comprehensive, universal, and generous public pension systems will exhibit more equal distributions of income in old age.Luxembourg Income Study data indeed show that cross-national variation in old-age income inequality is partly explained by differences in the percentage of seniors’ total income derived from public pension transfers. Sweden, for example, has the highest level of government transfers and the lowest level of old-age income inequality, while Israel and the United States have the lowest levels of dependency on government transfers and the highest levels of income inequality. A notable exception is Canada, where public transfers represent only a moderate portion of elderly income, yet old-age income inequality is relatively low. These findings suggest that quality of public pension benefits does indeed play a role in explaining differences in old-age income inequality between industrialized nations, yet these variations are also likely influenced by other factors.

Suggested Citation

  • Robert Brown & Steven Prus, 2004. "Social Transfers And Income Inequality In Old Age," North American Actuarial Journal, Taylor & Francis Journals, vol. 8(4), pages 30-36.
    • Handle: RePEc:taf:uaajxx:v:8:y:2004:i:4:p:30-36
    DOI: 10.1080/10920277.2004.10596169
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    Cited by:

    1. Kees Goudswaard & Olaf van Vliet & Jim Been & Koen Caminada, 2012. "Pensions and Income Inequality in Old Age," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 10(04), pages 21-26, December.
    2. repec:ces:ifodic:v:10:y:2012:i:4:p:19074538 is not listed on IDEAS
    3. Li, Jinjing & Wang, Xinmei & Xu, Jing & Yuan, Chang, 2020. "The role of public pensions in income inequality among elderly households in China 1988–2013," China Economic Review, Elsevier, vol. 61(C).
    4. Srinivas, Goli, 2014. "Demographic convergence and its linkage with health inequalities in India," MPRA Paper 79823, University Library of Munich, Germany, revised 05 Dec 2014.
    5. Kees Goudswaard & Olaf van Vliet & Jim Been & Koen Caminada, 2012. "Pensions and Income Inequality in Old Age," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 10(4), pages 21-26, December.
    6. Robert L. Brown & Steven G. Prus, 2006. "Income Inequality over the Later-Life Course: A Comparative Analysis of Seven OECD Countries," Social and Economic Dimensions of an Aging Population Research Papers 154, McMaster University.
    7. -, 2018. "Promoting equality: An interregional perspective," Documentos de Proyectos 43677, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    8. Robert Brown & Steven Prus, 2006. "Income Inequality over the Later-life Course: A Comparative Analysis of Seven OECD Countries," LIS Working papers 435, LIS Cross-National Data Center in Luxembourg.
    9. Filgueira, Fernando & Manzi, Pilar, 2017. "Pension and income transfers for old age: Inter- and intra-generational distribution in comparative perspective," Políticas Sociales 42087, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    10. Van Vliet, Olaf & Been, Jim & Caminada, Koen & Goudswaard, Kees, 2011. "Pension reform and income inequality among the elderly in 15 European countries," MPRA Paper 32940, University Library of Munich, Germany.

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