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Public Pension Generosity and Old-Age Poverty in OECD countries

Published online by Cambridge University Press:  07 July 2021

KATI KUITTO Open the ORCID record for KATI KUITTO [Opens in a new window] ,
JOAN E. MADIA Open the ORCID record for JOAN E. MADIA [Opens in a new window]  and
FEDERICO PODESTÀ Open the ORCID record for FEDERICO PODESTÀ [Opens in a new window]
KATI KUITTO
Affiliation:
Finnish Centre for Pensions, Research Department, Helsinki, Finland
JOAN E. MADIA*
Affiliation:
Department of Sociology, Nuffield College, University of Oxford, UK
FEDERICO PODESTÀ
Affiliation:
FBK-IRVAPP, Trento, Italy
*
Corresponding author. email: [email protected]
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Abstract

Pension adequacy is gaining importance as old-age poverty remains a pressing problem. In many advanced welfare states, the population is ageing rapidly and recent pension reforms have led to cuts in public pension provision. There are, however, few comparative longitudinal studies on the relationship between pension generosity and old-age poverty. This study provides a comparative empirical assessment of how the prevalence and depth of old-age poverty relates to generosity of public pension benefits in 14 advanced OECD welfare states from 1980-2010. We focus on the role of mandatory public pension provision of mainly first tier schemes that grant the major share of retirees’ income in most countries. We use data on theoretical pension replacement rates for retirees who had different working-age incomes. In order to address endogeneity issues, we adopt an instrumental-variable approach. Our main finding shows that pensions systems and earnings-related schemes, in particular, are quite efficient in reducing the risk of old-age poverty. Yet they still do very little to alleviate poverty among those pensioners in the most disadvantaged situations. We also found that redistribution within the pension system does not substantially contribute to poverty alleviation.

Keywords

pensionsold-age povertyincome replacementredistributionOECD countriestime-series-cross-section analysis
Type
Article
Information
Journal of Social Policy , Volume 52 , Issue 2 , April 2023 , pp. 256 - 275
Copyright
© The Author(s), 2021. Published by Cambridge University Press

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