Saving Accounts versus Stocks and Bonds in Household Portfolio Allocation

We study the structure of household portfolios of financial wealth by analyzing both the determinants of total financial wealth and the choice between risky (stocks and bonds) and riskfree assets (saving accounts). The econometric specification is a generalized trivariate Tobit model, estimated on a cross section of 3,077 households in the Netherlands in 1988. We account for endogeneity of financial wealth and for selectivity due to nonreporting. Results show that the level of financial wealth and the marginal tax rate are major determinants of the allocation between riskfree and risky assets.     

DEALER PRICING OF CONSUMER CREDIT*

Price discrimination incentives may induce dealers to bear the financial cost of their customers' credit purchases. We focus on how financial market imperfections make it possible to segment the customer population. When borrowing and lending rates differ from each other and from the rate of interest on a durable good purchase, the structure of those rates influences customers' choices to purchase on credit or cash terms, and the scope for dealers' price discrimination. Empirical analysis of a set of installment‐credit, personal‐loan, and regional interest rate data offers considerable support to the assumptions and implications of our theoretical framework.     

Compensatory inter vivos gifts

Parents' transfer motives are important for understanding, e.g., macroeconomics, income (re)distribution, savings, and public finance. Using data from six biennial waves of the Health and Retirement Study 1992–2002, we estimate censored regression models with nested multilevel error components. First, we interpret our findings that inter vivos transfers from parents to children are gifts, rather than temporary help to overcome liquidity constraints. Second, inter vivos gifts are compensatory in the sense that lifetime poorer children will receive higher transfers than their lifetime richer siblings. Third, inter vivos gifts do not, however, make up the entire difference in lifetime incomes. Copyright © 2009 John Wiley & Sons, Ltd.     

Household Debt and Credit: Economic Issues and Data Problems

We survey contributions to the analysis of household liabilities, highlighting relevant theoretical aspects and outlining how data sources may support empirical testing and measurement efforts. Specifically, we classify aspects of household debt, discussing the theoretical and policy relevance of heterogeneity across individual and country dimensions. Aiming to illustrate conceptual and measurement issues, we refer to the approaches and results of some recent relevant country-specific work on administrative and survey data, and we argue that research in this area would greatly benefit from availability of appropriately classified household liabilities data and of cross-country institutional information.     

Precautionary motives and portfolio decisions

This paper studies the empirical relevance of precautionary and other motives for household portfolio behaviour using recent panel data from the Netherlands. Dutch households' portfolios exhibit low degrees of risk taking and diversification. It is possible that this is the outcome of a rational, precautionary response to unavoidable exposure to background risk (stemming from the labour market or health conditions, etc.). We consider as alternative explanations liquidity needs and habits. The endogenous variable is the fraction of clearly safe in total financial assets at the household level. Parametric and semi‐parametric censored regression models for pooled cross‐sections and random and fixed effects models for panel data show that both heteroscedasticity and unobserved heterogeneity are of major importance in the data. With subjective indicators of income uncertainty we find a limited role for precautionary motives. Copyright © 2002 John Wiley & Sons, Ltd.