Private Pensions, Retirement Wealth and Lifetime Earnings
AbstractThis paper investigates the effect of private pensions on the retirement wealth distribution. The model incorporates stochastic private pension coverage into a life- cycle model with stochastic earnings. The predictions of the calibrated model are compared to the distribution of retirement net worth and private pension wealth in the PSID. While private pensions lead to higher wealth inequality and reduces the lifetime earnings - retirement wealth correlation, the model still generates too little wealth inequality. However, when we extend the model to include heterogeneous life-cycle earnings profiles and permanent return differences across households, we find that the model largely accounts for the sizeable variation in retirement wealth.
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Bibliographic InfoPaper provided by University of Western Ontario, Economic Policy Research Institute in its series University of Western Ontario, Economic Policy Research Institute Working Papers with number 20102.
Date of creation: 2010
Date of revision:
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Postal: Economic Policy Research Institute, Social Science Centre, University of Western Ontario, London, Ontario, Canada N6A 5C2
Phone: 519-661-2111 Ext.85244
Web page: http://economics.uwo.ca/research/research_papers/epri_workingpapers.html
private pensions; Wealth inequality; retirement;
Find related papers by JEL classification:
- D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
This paper has been announced in the following NEP Reports:
- NEP-AGE-2010-10-09 (Economics of Ageing)
- NEP-ALL-2010-10-09 (All new papers)
- NEP-DGE-2010-10-09 (Dynamic General Equilibrium)
- NEP-LAB-2010-10-09 (Labour Economics)
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