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Social Transfers and Income Inequality in Old-age: A Multi-national Perspective

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  • Robert L. Brown
  • Steven G. 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 U.S. 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. This suggests that other factors besides quality of public pension benefits play a role in differences in old-age income inequality across countries.

Suggested Citation

  • Robert L. Brown & Steven G. Prus, 2003. "Social Transfers and Income Inequality in Old-age: A Multi-national Perspective," Social and Economic Dimensions of an Aging Population Research Papers 109, McMaster University.
  • Handle: RePEc:mcm:sedapp:109
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    File URL: http://socserv.mcmaster.ca/sedap/p/sedap109.pdf
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    References listed on IDEAS

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    1. Lars Osberg, 1998. "Economic Insecurity," Discussion Papers 0088, University of New South Wales, Social Policy Research Centre.
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    Cited by:

    1. Maria Evandrou & Jane Falkingham & Tom Sefton, 2009. "The relationship between women’s work histories and incomes in later life in the UK, US and West Germany," CASE Papers case137, Centre for Analysis of Social Exclusion, LSE.
    2. Canback, Staffan & D'Agnese, Frank, 2007. "Where in the world is the market? : The income distribution approach to understanding consumer demand in emerging countries," MPRA Paper 13854, University Library of Munich, Germany.

    More about this item

    Keywords

    old-age; income inequality; public pension policy; government transfers;

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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