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Do the Rich Save More in Canada?

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Author Info
Sule Alan
Kadir Atalay
Thomas F. Crossley

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Abstract

This paper is an attempt to answer the long standing question of whether households with higher lifetime income save a larger fraction of their income. The major difficulty in empirically assessing the relationship between lifetime incomes and saving rates is to construct a credible proxy for lifetime income. The Canadian Family Expenditure Survey (FAMEX) provides us with both unusually good data on savings rates and potential instruments with which we can construct reliable lifetime income proxies. Our empirical analysis suggests that the estimated relationship between saving rates and lifetime incomes is sensitive to the instrument used to proxy lifetime income. Nevertheless, our preferred estimates indicate that, except for poorest households (who simply do not save), saving rates do not differ substantially across lifetime income groups.

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File URL: http://socserv.mcmaster.ca/qsep/p/qsep406.pdf
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Publisher Info
Paper provided by McMaster University in its series Quantitative Studies in Economics and Population Research Reports with number 406.

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Length: 31 pages
Date of creation: Jun 2006
Date of revision:
Handle: RePEc:mcm:qseprr:406

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Related research
Keywords: saving rates lifetime income permanent income

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Find related papers by JEL classification:
C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Microeconomic Data
D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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  1. Glenn R. Hubbard & Jonathan Skinner & Stephen P. Zeldes, . "Precautionary Saving and Social Insurance," Rodney L. White Center for Financial Research Working Papers 3-95, Wharton School Rodney L. White Center for Financial Research.
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  2. repec:att:wimass:199226 is not listed on IDEAS
  3. 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. [Downloadable!] (restricted)
    Other versions:
  4. Carroll, Christopher D & Rhee, Byung-Kun & Rhee, Changyong, 1994. "Are There Cultural Effects on Saving? Some Cross-Sectional Evidence," The Quarterly Journal of Economics, MIT Press, vol. 109(3), pages 685-99, August. [Downloadable!] (restricted)
  5. John Burbidge & Deborah Fretz & Michael R. Veall, 1998. "Canadian and American Saving Rates and the Role of RRSPs," Canadian Public Policy, University of Toronto Press, vol. 24(2), pages 259-263, June. [Downloadable!] (restricted)
  6. Kevin Milligan, 2001. "Tax-Preferred Savings Accounts and Marginal Tax Rates: Evidence on RRSP Participation," Social and Economic Dimensions of an Aging Population Research Papers 52, McMaster University. [Downloadable!]
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  7. Engelhardt, Gary V, 1996. "Tax Subsidies and Household Saving: Evidence from Canada," The Quarterly Journal of Economics, MIT Press, vol. 111(4), pages 1237-68, November. [Downloadable!] (restricted)
  8. B. Douglas Bernheim & John Karl Scholz, 1992. "Private Saving and Public Policy," NBER Working Papers 4215, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. Hurd, Michael D, 1987. "Savings of the Elderly and Desired Bequests," American Economic Review, American Economic Association, vol. 77(3), pages 298-312, June.
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