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What Accounts for the Variation in Retirement Wealth Among U.S. Households?

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Author Info
B. Douglas Bernheim
Jonathan Skinner
Steven Weinberg

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Abstract

Household survey data consistently depict large variations in saving and wealth among households with similar socio-economic characteristics. Within the context of the life" cycle hypothesis, families with identical lifetime resources might choose to accumulate" different levels of wealth for a variety of reasons, including variation in time preference rates risk tolerance, exposure to uncertainty, relative tastes for work and leisure at advanced ages income replacement rates, and so forth. These factors can be divided into a small number of" classes, each with a distinctive implication concerning the relation between accumulated wealth" and the shape of the consumption profile. By examining this relation empirically for the presence or absence of these particular explanations for differences in wealth. Using" the Panel Study of Income Dynamics and the Consumer Expenditure Survey little support for life cycle models that rely on the above factors to explain wealth variation. " The data are, however, consistent with rule of thumb' or mental accounting' theories of" wealth accumulation.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6227.

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Date of creation: Oct 1997
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Handle: RePEc:nbr:nberwo:6227

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Find related papers by JEL classification:
E2 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment
D1 - Microeconomics - - Household Behavior

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  7. B. Douglas Bernheim & Jonathan Skinner & Steven Weinberg, 1997. "What Accounts for the Variation in Retirement Wealth Among U.S. Households?," Working Papers 97035, Stanford University, Department of Economics. [Downloadable!]
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