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Life cycle accumulation and aging risks

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  • Legendre, Bérangère
  • El Mekkaoui de Freitas, Najat

Abstract

How to de ne the most appropriate institutional framework that could encourage to better plan retirement? The French population used to consider that the PAYG public pension system should finance pensions. The pension system being based on an insurance principle and intergenerational risk sharing, once retired, households estimate that the public system has to provide them an adequate level of pension. But in the context of pension reforms, the replacement rates provided by the PAYG pension system are going to decrease. Households will need to increase their savings rates to maintain their standard of living during retirement. We test the impact of new risks and aspects of the aging issue on retirement related asset holding behaviour. We integrate the longevity and disability risks, the impact of the public pension information system, which is a way to improve private nancial education and awareness, and psychological variables. We estimate bivariate probit models to better understand these behaviours. Our results indicate that the households change their mind and adapt their behaviour to new economic and demographic issues. The implementation of the pension information right allows them to increase their private savings for the retirement and the life expectancy at old age increases the probability to hold an annuity contract.

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Bibliographic Info

Paper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/11142.

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Date of creation: Aug 2012
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Handle: RePEc:dau:papers:123456789/11142

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Keywords: Retirement; private pension;

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References

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  1. B. Douglas Bernheim & Katherine Grace Carman & Jagadeesh Gokhale & Laurence J. Kotlikoff, 2001. "The Mismatch Between Life Insurance Holdings and Financial Vulnerabilities: Evidence from the Survey of Consumer Finances," NBER Working Papers 8544, National Bureau of Economic Research, Inc.
  2. Browning, M. & Bourguignon, F. & Chiappori, P.A. & Lechene, V., 1992. "Incomes and Outcomes: A structural Model of Intra-Household Allocation," DELTA Working Papers, DELTA (Ecole normale supérieure) 92-23, DELTA (Ecole normale supérieure).
  3. Karen E. Dynan & Jonathan Skinner & Stephen P. Zeldes, 2004. "Do the Rich Save More?," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 112(2), pages 397-444, April.
  4. David E. Bloom & David Canning & Bryan Graham, 2002. "Longevity and Life Cycle Savings," NBER Working Papers 8808, National Bureau of Economic Research, Inc.
  5. Annamarie Lusardi & Olivia S. Mitchell, 2005. "Financial Literacy and Planning: Implications for Retirement Wellbeing," Working Papers, University of Michigan, Michigan Retirement Research Center wp108, University of Michigan, Michigan Retirement Research Center.
  6. Arrondel, Luc & Masson, André & Verger, Daniel, 2009. "Le patrimoine en France : état des lieux, historique et perspectives," Economics Papers from University Paris Dauphine, Paris Dauphine University 123456789/5056, Paris Dauphine University.
  7. Blundell, Richard & Browning, Martin & Meghir, Costas, 1994. "Consumer Demand and the Life-Cycle Allocation of Household Expenditures," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 61(1), pages 57-80, January.
  8. B. Douglas Bernheim & Robert J. Lemke & John Karl Scholz, 2001. "Do Estate and Gift Taxes Affect the Timing of Private Transfers?," NBER Working Papers 8333, National Bureau of Economic Research, Inc.
  9. Christopher D Carroll & Karen E Dynan & Spencer D Krane, 1999. "Unemployment Risk and Precautionary Wealth: Evidence from Households' Balance Sheets," Economics Working Paper Archive, The Johns Hopkins University,Department of Economics 416, The Johns Hopkins University,Department of Economics.
  10. John Ameriks & Andrew Caplin & John Leahy, 2002. "Wealth Accumulation and the Propensity to Plan," NBER Working Papers 8920, National Bureau of Economic Research, Inc.
  11. Axel H. Boersch-Supan & Joachim K. Winter, 2001. "Population Aging, Savings Behavior and Capital Markets," NBER Working Papers 8561, National Bureau of Economic Research, Inc.
  12. Alan L. Gustman & Thomas L. Steinmeier, 2001. "Imperfect Knowledge, Retirement and Saving," Working Papers, University of Michigan, Michigan Retirement Research Center wp012, University of Michigan, Michigan Retirement Research Center.
  13. Cagetti, Marco, 2003. "Wealth Accumulation over the Life Cycle and Precautionary Savings," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 21(3), pages 339-53, July.
  14. Beverly, Sondra G. & Sherraden, Michael, 1999. "Institutional determinants of saving: implications for low-income households and public policy," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, Elsevier, vol. 28(4), pages 457-473.
  15. Menchik, Paul L & David, Martin, 1983. "Income Distribution, Lifetime Savings, and Bequests," American Economic Review, American Economic Association, American Economic Association, vol. 73(4), pages 672-90, September.
  16. Bernard, Philippe & El Mekkaoui de Freitas, Najat & Lavigne, Anne & Mahieu, Ronan, 2003. "Ageing and the Demand for Life Insurance : An Empirical Investigation using French Panel Data," Economics Papers from University Paris Dauphine, Paris Dauphine University 123456789/6152, Paris Dauphine University.
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