HOUSEHOLD SAVING AND PORTFOLIO CHANGE: EVIDENCE FROM THE 1983–89 SCF PANEL

There are few sources of high-quality data on the dynamics of wealth accumulation. This paper uses newly available data from the 1983 89 panel of the Survey of Consumer Finances to examine household saving and portfolio change over the 1980s. Our main findings are as follows. First, median household wealth rose modestly over the period. Second, while overall wealth inequality increased, households in the top 1 percent of the wealth distribution in 1983 saw their share of total wealth decline, probably reflecting turnover among the very wealthy. Third, although age, income, and initial wealth had significant effects in regressions on household saving, a large part of the variation in saving was unexplained. Finally, there were clear life-cycle patterns in the portfolios of assets and liabilities held by households, with younger households acquiring homes, businesses and all types of debts, and older households divesting themselves of these assets and debts.     

Do the Rich Save More in Japan? Evidence Based on two Micro Data Sets for the 2000s

Using two household surveys, this paper investigates whether the saving rates of richer households are higher than those of poorer households in Japan. We construct a number of proxies for lifetime wealth, including those original to this study, and find marginally positive correlations between saving rates and lifetime wealth for working age households. We further find that the relationship between saving rates and lifetime wealth differs depending on the life stage of individual households. Older households with higher lifetime wealth appear to be dissaving to some extent, which is more or less consistent with the lifecycle model of consumption.     

HOUSEHOLD SAVING IN THE U.S.

In this paper the authors present evidence on household saving in the U.S. based on the panel data from the 1983 and 1986 waves of the Survey of Consumer Finances. Saving is measured in these surveys as the change in wealth over the three-year period. Using a variety of models, we are able to explain only about 7 percent of the variation in the level of saving. Demographic factors appear to be modestly useful in explaining saving. However, one fact is very clear from the patterns of correlation extracted so far: either the measurement error in the data is quite large, or idiosyncratic factors are very important in explaining saving behavior, or both.     

THE IMPACT OF BEQUESTS ON LIFETIME WEALTH ACCUMULATION: AN ECONOMETRIC STUDY OF TWO GENERATIONS OF RURAL HOUSEHOLDS IN INDIA

Using retrospective data on bequest receipts and wealth over two generations of rural Indian households, we have estimated the effect of bequest receipts on the lifetime wealth accumulation of recipients. We exploit the availability of data on two generations of the same household by estimating a family fixed effects model that controls for unobserved, intergenerationally-persistent household endowments. Our results suggest an adverse impact of bequest receipts on the wealth accumulation of recipients. This effect is much more negative for the current generation of household heads than for the previous generation, indicating that the disincentive effects associated with bequest receipts have increased substantially over a generation. Such disincentive effects are consistent with the commonly-observed phenomenon of "regression to the mean." The empirical results also show that the positive association between schooling and wealth accumulation has strengthened substantially over the course of a generation, implying rising returns to schooling.     

Life-Cycle Saving in the United States, 1900–90

This paper examines how the proportion of US saving that represents life-cycle accumulation changed over the last century. As individuals retire earlier and live longer than before, the expected length of male retirement has increased by more than six-fold since 1850. According to life-cycle models of saving, this means that the proportion of lifetime income saved for retirement should rise over time. I estimate that the fraction of lifetime income saved for retirement tripled between 1900 and 1990. In contrast to such an increase in the estimated retirement saving, the actual aggregate household saving rates exhibit a relatively stable long-term tendency during the 20th century. Based on this result, I argue that the relative contribution of the life-cycle saving to US wealth accumulation increased substantially, perhaps two to three times, over the last hundred years.     

养老保险改革对家庭储蓄率的影响:中国的经验证据

本文利用1995年和1999年城镇住户调查数据(CHIPS)分析中国养老保险制度改革对家庭储蓄率的影响,从一个新的角度解释20世纪90年代中后期中国家庭储蓄率上升的原因。1995—1997年间中国对城镇企业职工进行的养老保险制度改革使得企业职工养老金财富发生变化,这种养老金财富的变化具有外生性,因而这项改革可以作为一项政策实验用来识别养老金财富对家庭储蓄率的影响。研究结果表明:中国的储蓄行为可以由生命周期模型解释;养老金财富对于家庭储蓄存在显著的替代效应,这一效应平均为-0.4—-0.3左右;但不同家庭这种替代效应有明显差异,户主年龄在35—49岁的家庭,储蓄率会显著受到养老金财富的影响,其他家庭这一影响并不显著。     

Business cycle fluctuations and household saving in OECD countries: A panel data analysis

We investigate the cyclicality of the household saving to household disposable income ratio for a panel of 16 OECD countries over the period 1969–2012. We find evidence that the household saving ratio is countercyclical. We empirically investigate whether the determinants of saving suggested by a standard buffer stock model of saving can explain this finding. The three main determinants of household saving implied by such a model (i.e., unemployment risk, household wealth and credit constraints) have a significant impact on the household saving ratio while their combined effect completely offsets its countercyclicality. The saving regression results are robust to potential endogeneity of the regressors, to making use of a reduced sample size that leaves out the period of the Great Recession, and to the one-by-one addition of variables suggested by alternative theories that also predict a countercyclical saving ratio.     

Wealth Inequality and Intergenerational Links

Previous work has had difficulty generating household saving behaviour that makes the distribution of wealth much more concentrated than that of labour earnings, and that makes the richest households hold onto large amounts of wealth, even during very old age. I construct a quantitative, general equilibrium, overlapping-generations model in which parents and children are linked by accidental and voluntary bequests and by earnings ability. I show that voluntary bequests can explain the emergence of large estates, while accidental bequests alone cannot, and that adding earnings persistence within families increases wealth concentration even more. I also show that the introduction of a bequest motive generates lifetime savings profiles more consistent with the data.     

THE SIZE DISTRIBUTION OF HOUSEHOLD DISPOSABLE WEALTH IN THE UNITED STATES

In this study, new estimates are presented of the size distribution of household wealth in the U.S. in 1969. Compared to previous studies, its major advance is the inclusion of all marketable or discretionary household assets and liabilities and their alignment with national balance sheet totals. Household disposable wealth (HDW) is defined as the sum of all marketable or fungible assets held by households less liabilities. The Gini coefficient for HDW is 0.72, the share held by the richest one percent of households is 31 percent, and the share held by the top five percent is 49 percent. There is, however, a large variation in the concentration of different household assets. The Gini coefficient is 0.30 for household durables and inventories, 0.69 for equity in owner-occupied housing, 0.94 for bonds and securities, and 0.98 for corporate stock. HDW is then divided into two mutually exclusive components. The first, called "life-cycle wealth," is defined as the sum of equity in owner-occupied housing, durables, household inventory, demand deposits and currency, and the cash value of life insurance and pensions less consumer debt. This form of wealth tends to be accumulated over the life-cycle for either consumption, liquidity, or retirement purposes. The second, called "capital wealth," is the sum of time and savings deposits, bonds and securities, corporate stock, business and investment real estate equity, and trust fund equity. Life-cycle wealth is substantially less concentrated than capital wealth. The Gini coefficient for it is 0.59, while that for capital wealth is 0.88. Moreover, among the lower wealth groups, over 80 percent of household wealth takes the form of life-cycle wealth, whereas among the top wealth groups the proportion is under 20 percent. The results suggest substantially different savings motivations between the two groups.     

Social security,saving, and macroeconomics

Arguing within the framework of a life-cycle hypothesis of consumption of the individual household, Martin Feldstein has claimed that a pay-as-you-go, unfunded social-security system implies a private-sector perception of wealth which both depresses private saving and raises aggregate consumption. But the effects in a macro-economic context are not the same. With less than full employment, perceived increments to private wealth in social security or any other government obligations should increase current and planned future consumption and saving, raising employment and output. With full employment, as long as monetary policy is appropriately accommodating, such increments to wealth should raise prices but leave all real variables, including capital accumulation, unaffected. Increases in social-security wealth would merely substitute for real private wealth in the form of explicit government bonds. Econometric estimates from corrected U.S. data on social security, public debt, income, and employment are consistent with these hypotheses.     

EDUCATION AND THE NATIONAL WEALTH OF THE UNITED STATES*

Human capital theory has motivated a great many empirical investigations into the relationship between education and earnings potential. These studies test refinements of the theory, but do not attempt to value education for the economy as a whole. This study develops series which track human wealth and its educational components for the United States from 1946 to 1980. Three related educational time sequences emerge: (1) schooling wealth, the present value of the current and future contributions of the existing schooling stock to national income; (2) net change in schooling wealth, the amount added to present value in that year; and (3) schooling investment, the present value of the future contributions of the new schooling conducted in that year. One important lesson of this exercise is that the last two series can be quite different as a result of the pattern of appreciation and depreciation of human wealth over the lifetimes of individuals. Moreover, education increases the age of peak human wealth and thus should shorten the period during which individuals save for retirement. This phenomenon may induce a demographic cycle in the nation's savings rate, especially evidenced with the aging of the baby-boom cohort. The magnitudes of the human and schooling wealth estimates are large when compared to financial wealth. For a 4 percent rate, the period-wide average for human wealth is five times-and schooling wealth 2.6 times-the Federal Reserve Board's measure of household net worth. These estimates are naturally sensitive to the discount rate chosen, but show that the gap between human and financial wealth has been widening and that the value of schooling provided in any year greatly exceeds its cost. Schooling represents a form of saving whose value is several times the conventional measure of saving.     

Social security in a Classical growth model

This paper develops a growth model with overlapping generationsof workers who save for life-cycle reasons and Ricardian capitalistswho save from a bequest motive. The population of workers accommodatesgrowth, so that the rate of capital accumulation is endogenousand determines the growth of employment. Two regimes are possible,one in which workers' saving dominates the long run and a secondin which the long-run equilibrium growth rate is determinedcompletely by the capitalist saving function, sometimes calledthe Cambridge equation. The second regime exhibits a versionof the Pasinetti paradox: changes in workers' saving affectthe level, but not the growth rate, of capital in the long run.Applied to social security, this result implies that an unfundedsystem relying on payroll taxes reduces workers' lifetime wealthand saving, creating level effects on the capital stock withoutaffecting its long-run growth rate. These effects are mitigatedby the presence of a reserve fund, various levels of which areexamined. Calibrating the model to realistic parameter valuesfor the US facilitates an interpretation of the controversiesover the percentage of the national wealth originating in life-cyclesaving and the effects of social security on saving. The modelis offered as an analytical framework for the review of currenttopics in fiscal policy, in particular identifying the socialsecurity reserve fund as a potential vehicle for generatingcapital accumulation and effecting a progressive redistributionof wealth.     

The Impact of Inheritance on the Distribution of Wealth: Evidence from Great Britain

Using the British Household Panel Survey, we investigate the role of inheritance in shaping the distribution of household wealth in Great Britain during 1995–2005a period characterized by a substantial increase in wealth and an equally important decrease in wealth inequality. Abstracting from behavioral effects, we find that inheritances received during this period accounted for 30 percent of the increase in wealth of inheritors. Regression estimates of the effect of inheritance on wealth accumulation suggest that households spend 30 percent of their inheritances on average, and that there is substantial heterogeneity in household responses. Households that accumulated more wealth saved a larger share of their inheritances, as did middle aged households and those with lower initial wealth. Although inheritances are highly unequal they had a small impact on overall wealth inequality. This mainly reflected the fact that their size relative to other sources of wealth was very small.     

INCOME AND WEALTH OVER THE LIFE CYCLE EVIDENCE FROM PANEL DATA

In this paper we examine household wealth and income in the Netherlands using data from the Socio Economic Panel (SEP) in the period 1987–89. We provide an evaluation of the quality of the data and some simple statistics which describe the behavior of wealth, saving, and income over the life cycle. We find there is substantial heterogeneity in the behavior of households, and wealth holdings vary substantially even among the same age group. By exploiting the panel feature of the SEP, we derive saving from first differencing wealth. We find that a sizeable fraction of households do not dissave when old and we find some evidence in favor of the bequest motive.     

The Impact of Children on Australian Couples’ Wealth Accumulation

Existing estimates of the cost of children focus on what parents spend on their children, which has limited relevance to parents’ financial capacity to meet those costs. An alternative indicator of the affordability of children, their impact upon couples’ wealth accumulation, is estimated using the lifecycle model and Australian household panel data. The results suggest children have a very small impact upon wealth accumulation, seemingly at odds with the large ‘costs’ implied from expenditure‐based estimates. In reconciling these highly divergent estimates we argue that the net‐wealth approach is an intuitively more appealing indicator of the financial impost of children.     

Why Do Some Households Save So Little? A Rational Explanation

This paper offers an explanation for the puzzle of low wealth holdings among a significant fraction of the elderly. Instead of invoking irrational, nonrational, or nonoptimal behavior to resolve the puzzle, it is shown that widespread low wealth holdings are consistent with a rational life-cycle model of saving with uncertain lifetime and borrowing constraint. When there is uncertainty about the length of life, it is optimal for some individuals to save little and exhaust their wealth early. The characteristics of these individuals are derived. The simulation results support that the model can account for low wealth holdings as well as early terminal wealth depletion. The analysis also rejects the common perception that uncertain lifetime reduces dissaving. Journal of Economic Literature Classification Numbers: D11, D91, E21, I12, J14.     

WEALTH HOLDINGS AND POVERTY STATUS IN THE U.S.

Families below the poverty line are better off in terms of wealth than income. In 1962, the ratio of mean income between families below and above the poverty line is 0.19 and the ratio of mean wealth is 0.29. The corresponding ratios for 1983 are 0.16 and 0.19. On average, the elderly poor are better off in terms of wealth than the younger poor, particularly relative to their own income. However, the poor have become worse off in terms of wealth between 1962 and 1983, when their real income grew by 6 percent and their real wealth declined by 11 percent. The inclusion of pension and social security wealth in the household portfolio narrows the wealth gap between the poor and non-poor, particularly for families under 65 years of age. Alternative poverty rates are also calculated based on the inclusion of annuity flows from wealth in household income. The reduction in the poverty rate between 1962 and 1983, from 21 to 15 percent on the basis of the official rate, is considerably lower with these alternative definitions.     

EXPLAINING THE SAVING PUZZLES IN URBAN CHINA

This paper identifies two saving puzzles obtained from the Chinese Urban Household Survey data from 1990 to 2006. The first saving puzzle is identified by the time trend of household saving rates, which were stable before 1998, but surged subsequently. The second saving puzzle is associated with the various age profiles of household saving rates, which are not only inconsistent with the prediction of the Life Cycle Hypothesis, but also different from the patterns observed in other economies. This paper constructs pseudo‐panel data and empirically examines the applicability of the habit‐formation model in solving the second saving puzzle through the existence of saving rates and the effects of income‐related variables. On the other hand, the parametric changes of such variables help explain the first saving puzzle. The parametric changes possibly stem from the adjustment of habit stock, the rising transitory shocks of income, and the higher expenditure needs for housing.     

中国城镇居民的财产分配

本文利用住户调查数据对 1 995年的中国城镇住户的财产分配状况进行了经验分析 ,包括对财产分配的差距进行了测量 ,影响财产分配的主要因素进行了估计 ,并将中国城镇住户的财产分配进行了国际比较。与大部分市场经济国家相比 ,中国城镇居民之间财产分配的差距并不大。但是中国城镇居民的财产分配差距超过了收入分配差距 ,而且从长期趋势上可能会出现加速扩大的势头。中国城镇居民之间财产分配的不均等并非全是经济市场化过程的结果。一些不均等的原因来自于传统计划经济遗留下来的分配模式。本文还发现 ,在户主一生中财产积累出现了两个高峰值。这是与正统的生命周期理论不同的。本文还表明了财产分配和收入分配之间的较强相关性。     

Precautionary savings of agents with heterogeneous risk aversion

This article focuses on the estimation of the importance of the precautionary motive in the wealth accumulation decision. We use the micro data set of the De Nederlandsche Bank (DNB) Household Survey (DHS) (CentERdata, Tilburg University), a Dutch household survey containing information on wealth, a subjective measure of income uncertainty and subjective qualitative measures of risk aversion. We find that only a small share of wealth is accumulated for the precautionary motive by the Dutch households. This share of wealth is constant across assets with different degrees of liquidity. The economic downturn of the period 2008 to 2010 seems to affect risk attitudes and precautionary saving. Our findings also suggest that the more risk-averse individuals are those who hold less savings.