An evaluation of the impact of the pension system on income inequality: USA, UK, Netherlands, Italy and Türkiye

Abstract

This study examines empirically the impact of various characteristics of pension systems, in particular their quality and integrity, on income inequality, utilizing micro-level data from the United States, United Kingdom, Netherlands, Türkiye and Italy. To this end, the income inequality model, which includes public pension (or public/private pension mix), age, education, gender, marital status and employment as independent variables, has been estimated using quantile regression. The results provide a number of valuable information on the impact of the pension system on income inequality: (i) Public pension income significantly reduces overall income inequality across almost all inequality groups in all countries, except for the UK and the Netherlands; (ii) Different types of pension systems vary significantly in their redistributive effects on income; (iii) The empirical results also show that the effect of different pension systems on inequality changes by inequality groups significantly.