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

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  • B. Douglas Bernheim
  • Jonathan Skinner
  • Steven Weinberg

Abstract

Even among households with similar socioeconomic characteristics, saving and wealth vary considerably. Life-cycle models attribute this variation to differences in time preference rates, risk tolerance, exposure to uncertainty, relative tastes for work and leisure at advanced ages, and income replacement rates. These factors have testable implications concerning the relation between accumulated wealth and the shape of the consumption profile. Using the Panel Study of Income Dynamics and the Consumer Expenditure Survey, we find little support for these implications. The data are instead consistent with "rule of thumb," "mental accounting," or hyperbolic discounting theories of wealth accumulation.

Suggested Citation

  • B. Douglas Bernheim & Jonathan Skinner & Steven Weinberg, 2001. "What Accounts for the Variation in Retirement Wealth among U.S. Households?," American Economic Review, American Economic Association, vol. 91(4), pages 832-857, September.
  • Handle: RePEc:aea:aecrev:v:91:y:2001:i:4:p:832-857
    Note: DOI: 10.1257/aer.91.4.832
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    More about this item

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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