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Unpublished Paper
The Effect of Public Pension Wealth on Saving and Expenditure
Upjohn Institute Working Paper 15-223 (2015)
  • Marta Lachowska
  • Michał Myck
Abstract
In order to study whether public pension systems displace private saving, we use the quasi-experimental variation in pension wealth created by Poland’s 1999 pension reform. Using the 1997–2003 Polish Household Budget Surveys, we begin by estimating “difference-in-differences” regressions, where we compare household saving and expenditure across time and between cohorts affected and unaffected by the reform. Next, we estimate the extent of crowd-out by using two-stage least squares. We identify the effect of pension wealth on private saving by using the cohort-by-time variation in pension wealth that is explained by the reform. We find that one additional Polish zloty, or PLN, of pension wealth crowds out about 0.24 PLN in household saving. We also find heterogeneity in responses. For the middle-aged cohorts, we find a large public pension crowd-out of private saving (about 0.54 PLN of private saving for each 1 PLN of public pension wealth), while the crowd-out for younger cohorts equals about 0.30 PLN of private saving per 1 PLN. Finally, we find a close-to-complete crowd-out among highly-educated households.
Keywords
  • pension reforms,
  • public pensions,
  • retirement saving,
  • household saving,
  • household expenditure,
  • pension wealth,
  • crowd-out effect,
  • difference-in-differences,
  • natural experiment,
  • Poland
Publication Date
January 1, 2015
Citation Information
Lachowska, Marta, and Michał Myck. 2015. "The Effect of Public Pension Wealth on Saving and Expenditure." Upjohn Institute Working Paper 15-223. Kalamazoo, MI: W.E. Upjohn Institute for Employment Research.