Life Cycle Income and Consumption Patterns in Poland

Abstract

This paper investigates the life cycle profiles of income and consumption and
relative income mobility in Poland - a transition economy facing rapid structural
economic and social changes. According to my results, and in line with the
empirical evidence for advanced economies, the age-profiles of average income
and consumption in Poland exhibit a hump. The inequality of income over the
life cycle is found to flatten relatively quickly in Poland, which contrasts with the
approximately linear shape observed in the US. When individual income process
is fitted to match the Polish inequality profile, it exhibits less persistence than
in the US. Past earnings turn out to affect current income more strongly for the
group of more educated individuals. Moreover, and in contrast to the permanent
income hypothesis as well as findings for other economies, no evidence of an
increase in consumption inequality for households older than 30 years is found.
Finally, the obtained estimates of relative income mobility in Poland are higher
than those for developed countries.