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Pension Wealth and Household Saving: Evidence from Pension Reforms in the United Kingdom

  • Orazio P. Attanasio
  • Susann Rohwedder

Using three major U.K. pension reforms as natural experiments we investigate the relationship between pension saving and discretionary private savings. Unlike most differences-in-differences approaches which rely on average differences between control and treatment group, we use economic theory to model the response of each individual household. The empirical analysis, based on the Family Expenditure Survey, uses both time-series and cross-sectional variation to identify the behavioral response. The earnings-related tier of the pension scheme is found to have a negative impact on private savings with relatively high substitution elasticities; the impact of the flat-rate tier is not significantly different from zero.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/000282803322655419
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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 93 (2003)
Issue (Month): 5 (December)
Pages: 1499-1521

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Handle: RePEc:aea:aecrev:v:93:y:2003:i:5:p:1499-1521
Note: DOI: 10.1257/000282803322655419
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  1. King, M A & Dicks-Mireaux, L-D L, 1982. "Asset Holdings and the Life-Cycle," Economic Journal, Royal Economic Society, vol. 92(366), pages 247-67, June.
  2. William G. Gale, 1998. "The Effects of Pensions on Household Wealth: A Reevaluation of Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 106(4), pages 706-723, August.
  3. Alan L. Gustman & Thomas L. Steinmeier, 1998. "Effects of Pensions on Saving: Analysis with Data from the Health and Retirement Study," NBER Working Papers 6681, National Bureau of Economic Research, Inc.
  4. Hubbard, R Glenn, 1986. "Pension Wealth and Individual Saving: Some New Evidence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 18(2), pages 167-78, May.
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  7. Orazio Attanasio & James Banks, 1998. "Trends in household saving: a tale of two countries," IFS Working Papers W98/15, Institute for Fiscal Studies.
  8. R Disney & C Emmerson & M Wakefield, 2001. "Pension reform and saving in Britain," Oxford Review of Economic Policy, Oxford University Press, vol. 17(1), pages 70-94, Spring.
  9. Jappelli, Tullio, 1995. "Does social security reduce the accumulation of private wealth? Evidence from Italian survey data," Ricerche Economiche, Elsevier, vol. 49(1), pages 1-31, March.
  10. Orazio P. Attanasio & Agar Brugiavini, 2003. "Social Security And Households' Saving," The Quarterly Journal of Economics, MIT Press, vol. 118(3), pages 1075-1119, August.
  11. Eric M. Engen & William G. Gale & John Karl Scholz, 1996. "The Illusory Effects of Saving Incentives on Saving," Journal of Economic Perspectives, American Economic Association, vol. 10(4), pages 113-138, Fall.
  12. Feldstein, Martin S, 1974. "Social Security, Induced Retirement, and Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, vol. 82(5), pages 905-26, Sept./Oct.
  13. Dilnot, Andrew & Disney, Richard & Johnson, Paul & Whitehouse, Edward, 1994. "Pensions policy in the UK: An economic analysis," MPRA Paper 10478, University Library of Munich, Germany.
  14. James M. Poterba & Steven F. Venti & David A. Wise, 1996. "How Retirement Saving Programs Increase Saving," Journal of Economic Perspectives, American Economic Association, vol. 10(4), pages 91-112, Fall.
  15. B. Douglas Bernheim, 1996. "Rethinking Saving Incentives," Working Papers 96009, Stanford University, Department of Economics.
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