The study attempts to link the descriptive economics with the
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theoretical model of permanent income and life cycle hypothesis (PILCH)
to shed some light on a low private savings rate for Polish households.
These may be explained by the households' belief that the public pension
are a collateral to borrow against, which could discourage the buffer
stock effect. The study comprises two research fields: 1) the estimation
of so called augmented wealth, and, 2) the marginal propensity to
consume (MPC) out of different types of wealth with the permanent income
model. The mean augmented wealth (i.e. net wealth plus public pension
wealth) per household in PLN amounted to 705 thousands, consisting of
public pension wealth of 388 thousands and net wealth of 415 thousands.
The model perfectly matches the augmented wealth Lorenz curve. The
average MPC out of all types of wealth reaches 10% on average, ranging
6-20%, with a negative MPC to wealth correlation, and 60% of
hand-to-mouth households. The explanation for this perfect match may
stem from a high wage growth (also public pension contributions wedge)
that that builds the public pension wealth. The Ricardian-type
households may then mentally account the future pensions as a collateral
(fiduciary money) for current high MPC, which may implicate crowding out
their propensity to save for retirement privately.