The Effect of Public Pension Wealth on Saving and Expenditure

Upjohn Institute Working Paper No. 15-223

56 Pages Posted: 25 Feb 2015 Last revised: 30 Nov 2017

See all articles by Marta Lachowska

Marta Lachowska

W.E. Upjohn Institute for Employment Research; Stockholm University - Department of Economics

Michal Myck

Centre for Economic Analysis (CenEA); University of Greifswald

Multiple version iconThere are 2 versions of this paper

Date Written: June 19, 2017

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, crowd-out effect, retirement saving, difference-in-differences, natural experiment

JEL Classification: E21, H55, I38, P35

Suggested Citation

Lachowska, Marta and Myck, Michal, The Effect of Public Pension Wealth on Saving and Expenditure (June 19, 2017). Upjohn Institute Working Paper No. 15-223, Available at SSRN: https://ssrn.com/abstract=2569308 or http://dx.doi.org/10.2139/ssrn.2569308

Marta Lachowska (Contact Author)

W.E. Upjohn Institute for Employment Research ( email )

300 South Westnedge Avenue
Kalamazoo, MI 49007-4686
United States

HOME PAGE: http://www.upjohn.org/AboutUs/Staff/Lachowska

Stockholm University - Department of Economics ( email )

Stockholm University
Stockholm, 10691
Sweden

HOME PAGE: http://www2.sofi.su.se/~mla/

Michal Myck

Centre for Economic Analysis (CenEA) ( email )

ul. Cyfrowa 2
Szczecin, 71-441
Poland

HOME PAGE: http://www.cenea.org.pl

University of Greifswald ( email )

Friedrich-Loeffler-Strasse 70
D-17487 Greifswald, 17489
Germany

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