Life Cycle Income and Consumption Patterns in Poland

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.