Social Security and Inequality in Belgium

Over the years, the Belgian social security system has undergone substantial reform with
a prime focus on increasing older worker labor force participation. The paper explores the
effect of past reforms on inequality in old age. We distinguish two separate effects: The
mechanical effect considers the change in inequality and expected benefit levels due to
the reforms for a fixed retirement age distribution. The behavioral effect accounts for the
endogenous change caused by changes in the incentives to work. Our results show that
mechanically, reforms have led to losses in expected benefits for all but the lowest income
quintile. Behavioral changes had a positive but orders of magnitude smaller effect. Overall, inequality decreased as a result of reforms.