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The Displacement Effects of Social Security Wealth in a Transition Economy: The Case of Poland

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  • Marcin Wroński

Abstract

Economic theory does not give clear predictions on the impact of social security wealth on private wealth. While the basic life-cycle hypothesis predicts full displacement, many more advanced theoretical contributions anticipate only a limited offset. Empirical research on the issue is also not conclusive. In this paper, we measure the substitution between social security wealth and private wealth in Poland. To obtain measures of long-term substitution, we measure the displacement effects of social security wealth on net wealth. Our estimates of the effects on consumption and the saving rate reflect a short-term impact. Our results do not provide support for the hypothesis that social security wealth crowds out private savings in the long term. The short-term evidence is mixed, but the effects of social security wealth on consumption are at best weak, while the impact on saving rates is not statistically significant. In our view, in transition economies, the influence of social security wealth on private wealth is weaker than in developed economies because the wealth distribution has been to a large extent transformed by random and rapid events such as the privatisation of housing assets.

Suggested Citation

  • Marcin Wroński, 2023. "The Displacement Effects of Social Security Wealth in a Transition Economy: The Case of Poland," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 1, pages 19-40.
    • Handle: RePEc:sgh:gosnar:y:2023:i:1:p:19-40
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    More about this item

    Keywords

    public economics; crowding out; social security wealth; household wealth; wealth distribution;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • 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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