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Savings and wealth of the lifetime rich: evidence from the UK and US

Author

Listed:
  • Antoine Bozio

    (Institute for Fiscal Studies and Paris School of Economics)

  • Carl Emmerson

    (Institute for Fiscal Studies and Institute for Fiscal Studies)

  • Cormac O'Dea

    (Institute for Fiscal Studies and Yale University)

  • Gemma Tetlow

    (Institute for Fiscal Studies)

Abstract

Whether higher lifetime income households do save a larger share of their income is one of the longstanding empirical questions in economics that has been surprisingly difficult to answer. We use both consumption data and a new dataset containing both individual survey data on wealth holdings and administrative data on earnings histories from the UK to examine this question. We find evidence of a positive relationship between saving rates (and wealth accumulation) and levels of permanent income. Our findings are consistent with earlier results from Dynan, Skinner and Zeldes (2004) using consumption data from the US, but somewhat at odds with evidence from the UK which has examined retirement wealth and lifetime earnings in the Health and Retirement Study, HRS (Gustman & Steinmeier 1999, Venti & Wise 1998). We present new evidence using more recent HRS data, applying exactly the same methodology as we have used on the UK data, and find broadly the same results as these earlier papers. This suggests that the differences are not solely driven by differences in methodology or time period considered.

Suggested Citation

  • Antoine Bozio & Carl Emmerson & Cormac O'Dea & Gemma Tetlow, 2013. "Savings and wealth of the lifetime rich: evidence from the UK and US," IFS Working Papers W13/30, Institute for Fiscal Studies.
    • Handle: RePEc:ifs:ifsewp:13/30
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    References listed on IDEAS

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    1. Milton Friedman, 1957. "Introduction to "A Theory of the Consumption Function"," NBER Chapters, in: A Theory of the Consumption Function, pages 1-6, National Bureau of Economic Research, Inc.
    2. James Banks & Carl Emmerson & Gemma Tetlow, 2005. "Estimating pension wealth of ELSA respondents," IFS Working Papers W05/09, Institute for Fiscal Studies.
    3. James M. Poterba, 1994. "International Comparisons of Household Saving," NBER Books, National Bureau of Economic Research, Inc, number pote94-1, July.
    4. Antoine Bozio & Carl Emmerson & Gemma Tetlow, 2011. "How much do lifetime earnings explain retirement resources?," IFS Working Papers W11/02, Institute for Fiscal Studies.
    5. Sule Alan & Kadir Atalay & Thomas F. Crossley, 2006. "Do the Rich Save More in Canada?," Quantitative Studies in Economics and Population Research Reports 406, McMaster University.
    6. Saez, Emmanuel, 2002. "The desirability of commodity taxation under non-linear income taxation and heterogeneous tastes," Journal of Public Economics, Elsevier, vol. 83(2), pages 217-230, February.
    7. Gustman, Alan L. & Steinmeier, Thomas L., 1999. "Effects of pensions on savings: analysis with data from the health and retirement study," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 50(1), pages 271-324, June.
    8. Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1, July.
    9. Atkinson, A. B. & Stiglitz, J. E., 1976. "The design of tax structure: Direct versus indirect taxation," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 55-75.
    10. Karen E. Dynan & Jonathan Skinner & Stephen P. Zeldes, 2004. "Do the Rich Save More?," Journal of Political Economy, University of Chicago Press, vol. 112(2), pages 397-444, April.
    11. Haider, S. & Solon, G., 2000. "Nonrandom Selection in the HRS Social Security Earnings Sample," Papers 00-01, RAND - Labor and Population Program.
    12. Venti, Steven F & Wise, David A, 1998. "The Cause of Wealth Dispersion at Retirement: Choice or Chance?," American Economic Review, American Economic Association, vol. 88(2), pages 185-191, May.
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    Cited by:

    1. Ken Tabata, 2021. "Redistributive Policy and R&D-based Growth," Discussion Paper Series 227, School of Economics, Kwansei Gakuin University.
    2. Néstor Gandelman, 2017. "Do the rich save more in Latin America?," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 15(1), pages 75-92, March.
    3. B. Garbinti & P. Lamarche, 2014. "Do the High-Income Households Save More?," Documents de Travail de l'Insee - INSEE Working Papers g2014-10, Institut National de la Statistique et des Etudes Economiques.
    4. Bertrand Garbinti & Pierre Lamarche, 2014. "Les hauts revenus épargnent‑ils davantage ?," Économie et Statistique, Programme National Persée, vol. 472(1), pages 49-64.
    5. Julio López Laborda & Carmen Marín González & Jorge Onrubia, 2019. "Observatorio sobre el reparto de los impuestos y las prestaciones monetarias entre los hogares españoles. Cuarto informe: 2016 y 2017," Studies on the Spanish Economy eee2019-36, FEDEA.
    6. Noritaka Maebayashi & Kunihiko Konishi, 2016. "Sustainability of the public debt and wealth inequality in a general equilibrium model," Discussion Papers in Economics and Business 16-33, Osaka University, Graduate School of Economics.

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