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What is the impact of pensions on saving?

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Author Info

  • Alicia H. Munnell
  • Frederick O. Yohn

Abstract

The enormous growth in both Social Security and private pension plans has stimulated much interest in the impact of these retirement programs on individual saving behavior and the level of national saving. The first issue is the extent to which employees covered by pension plans reduce their own direct saving in response to expected retirement benefits; the response of individuals to guaranteed retirement income will determine, to a large extent, their well-being in retirement. For a nation concerned about saving and capital formation, the second issue is the impact of collectivized retirement saving plans on the national saving rate. This impact will depend not only on individual responses to promised pension benefits, but also on the extent to which firms undertake direct saving, and, if they do not, the extent to which shareholders recognize and compensate for unfunded pension liabilities. The effect of pensions on national saving also requires determining the degree to which increased saving induced by favorable tax provisions exceeds the loss of government revenues. ; This paper will lay out the questions that need to be answered in order to determine the impact of private pension plans on saving, highlight those aspects of pensions that may complicate the analysis, summarize the results of empirical research in this area, and finally make recommendations for improvements in the data.

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File URL: http://www.bostonfed.org/economic/wp/wp1991/wp91_5.pdf
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Bibliographic Info

Paper provided by Federal Reserve Bank of Boston in its series Working Papers with number 91-5.

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Date of creation: 1991
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Publication status: Published in Pensions and the Economy: Sources, Uses, and Limitations of Data, University of Pennsylvania Press for the Pension Research Council (1992).
Handle: RePEc:fip:fedbwp:91-5

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Keywords: Saving and investment ; Pensions;

References

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  1. Jeremy I. Bulow & Randall Morck & Lawrence H. Summers, 1987. "How Does the Market Value Unfunded Pension Liabilities?," NBER Working Papers 1602, National Bureau of Economic Research, Inc.
  2. Philip Cagan, 1965. "The Effect of Pension Plans on Aggregate Saving: Evidence from a Sample Survey," NBER Books, National Bureau of Economic Research, Inc, number caga65-2, May.
  3. Pitelis, Christos N, 1985. "The Effects of Life Assurance and Pension Funds on Other Savings: The Postwar UK Experience," Bulletin of Economic Research, Wiley Blackwell, vol. 37(3), pages 213-29, September.
  4. Kotlikoff, Laurence J, 1979. "Testing the Theory of Social Security and Life Cycle Accumulation," American Economic Review, American Economic Association, vol. 69(3), pages 396-410, June.
  5. Modigliani, Franco, 1988. "The Role of Intergenerational Transfers and Life Cycle Saving in the Accumulation of Wealth," Journal of Economic Perspectives, American Economic Association, vol. 2(2), pages 15-40, Spring.
  6. Martin Feldstein & Stephanie Seligman, 1981. "Pension Funding, Share Prices, and National Saving," NBER Working Papers 0509, National Bureau of Economic Research, Inc.
  7. Hemming, Richard & Harvey, Russell, 1983. "Occupational Pension Scheme Membership and Retirement Saving," Economic Journal, Royal Economic Society, vol. 93(369), pages 128-44, March.
  8. Boskin, Michael J, 1978. "Taxation, Saving, and the Rate of Interest," Journal of Political Economy, University of Chicago Press, vol. 86(2), pages S3-27, April.
  9. Feldstein, Martin & Pellechio, Anthony, 1979. "Social Security and Household Wealth Accumulation: New Microeconometric Evidence," The Review of Economics and Statistics, MIT Press, vol. 61(3), pages 361-68, August.
  10. Alan S. Blinder, 1982. "Private Pensions and Public Pensions: Theory and Fact," NBER Working Papers 0902, National Bureau of Economic Research, Inc.
  11. Michael J. Boskin, 1978. "Taxation, Saving, and the Rate of Interest," NBER Chapters, in: Research in Taxation, pages 3-27 National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Munnell, Alicia H., 1991. "Are Pensions Worth the Cost?," National Tax Journal, National Tax Association, vol. 44(3), pages 393-403, September.
  2. BELAN, P. & MICHEL, Ph. & WIGNIOLLE, B., 2001. "Pension funds and capital accumulation," CORE Discussion Papers 2001026, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Alan L. Gustman & Olivia S. Mitchell & Thomas L. Steinmeier, 1993. "The Role of Pensions in the Labor Market," NBER Working Papers 4295, National Bureau of Economic Research, Inc.
  4. Jeannine Bailliu & Helmut Reisen, 1998. "Do funded pensions contribute to higher aggregate savings? A cross-country analysis," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 134(4), pages 692-711, December.
  5. Geoffrey M. B. Tootell, 1996. "Can studies of application denials and mortgage defaults uncover taste-based discrimination?," Working Papers 96-10, Federal Reserve Bank of Boston.
  6. Alan L. Gustman & F. Thomas Juster, 1995. "Income and Wealth of Older American Households: Modeling Issues for Public Policy Analysis," NBER Working Papers 4996, National Bureau of Economic Research, Inc.
  7. Leechor, Chad, 1996. "Reforming Indonesia's pension system," Policy Research Working Paper Series 1677, The World Bank.

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