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Uncertain pension income and household saving

Author

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  • van Santen, Peter

    (Research Department, Central Bank of Sweden)

Abstract

This paper investigates the relationship between household saving and pensions, and estimates both the displacement effect of pensions on private saving and the precautionary saving effect due to uncertainty in pension income. I estimate the savings equation derived from a lifecycle model featuring income uncertainty using survey data for Dutch households, with subjective expectations on pension benefits and uncertainty. Exploiting exogenous variation due to pension fund performance, I find that households save significantly more due to uncertainty in pension income. Not controlling for uncertainty biases the estimated displacement effect of pensions on private savings towards zero.

Suggested Citation

  • van Santen, Peter, 2016. "Uncertain pension income and household saving," Working Paper Series 330, Sveriges Riksbank (Central Bank of Sweden).
    • Handle: RePEc:hhs:rbnkwp:0330
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    File URL: http://www.riksbank.se/Documents/Rapporter/Working_papers/2016/rap_wp330_161013.pdf
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    References listed on IDEAS

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    Cited by:

    1. Robert-Paul Berben & Ide Kearney & Robert Vermeulen, 2018. "DELFI 2.0, DNB's Macroeconomic Policy Model of the Netherlands," DNB Occasional Studies 1605, Netherlands Central Bank, Research Department.
    2. Tullio Jappelli & Immacolata Marino & Mario Padula, 2019. "Pension Uncertainty and Demand for Retirement Saving," CSEF Working Papers 526, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.

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    More about this item

    Keywords

    Precautionary saving; Displacement effect; Subjective expectations;
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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