Changes in Private Pensions and Income Inequality in Retirement: A Decomposition Analysis by Income Source in Nine European Countries (1986–2018)

Abstract Private pensions have expanded in recent decades many European countries, albeit to different extent. As private historically been more unequally distributed than public pensions, it is reasonable expect that pension privatization has increased the dispersion of incomes among retired. However, few studies empirically tested this claim. The purpose study assess how expansion affects developments income inequality Using microdata from Luxembourg Income Study, decomposition analyses by source are conducted around 1986 and 2018 nine countries. To account for cross-country variations public–private mix, distinguishes between mature multi-pillar systems, emergent dominant systems. results highlight an interesting paradox. Higher shares retirement a substantial inequality-increasing effect; yet, overall retired not necessarily increased, 2 reasons. First, equally systems declining capital either fully or partially compensated due larger pensions. Second, became most