IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Modelling Private Wealth Accumulation and Spend-down in the Italian Microsimulation Model CAPP_DYN: A Life-Cycle Approach

  • Simone Tedeschi

    ()

    (Sapienza University of Rome)

  • Elena Pisano

    ()

    (Bank of Italy)

  • Carlo Mazzaferro

    ()

    (University of Bologna and CAPP)

  • Marcello Morciano

    ()

    (University of East Anglia, ISER and CAPP)

In microsimulation literature a limited number of models include a module aimed at analyzing and projecting the evolution of private wealth over time. However, this issue appears crucial in order to comprehensively evaluate the likely distributional effects of institutional reforms adopted to cope with population ageing. In this work we describe the implementation in the Italian dynamic micro simulation model CAPP_DYN of a new module in which households’ savings and asset allocation are modelled. In particular, we aim to account for possible behavioural responses to pension reforms in household savings. To this end, we rely on an approximate life cycle structural framework for estimating saving behaviour, while adopting a traditional stochastic micro simulation approach for asset allocation. In line with Ando and Nicoletti Altimari (2004), we emphasize the role of lifetime economic resources in households’ consumption decisions, yet we further account for internal habit formation and subjective expectations on pension outcomes in the econometric stage. In addition, we model intergenerational transfers of private wealth in a probabilistic fashion. As the behavioural hypothesis adopted can largely affect results, we compare our semi-structural life-cycle approach with the estimation and the simulation of a non-structural consumption rule, analyzing wealth and disposable income dynamics and their drivers according to the two methods, especially in a long-term intergenerational perspective. While a 'quasi' life cycle consumption profile, including saving responses to pension reforms, curbs the dynamics of wealth inequality compared to the non-structural approach, results for the period 2010-2050 suggest an increasing contribution of intergenerational transfers to the predicted increase in wealth dispersion. Although hypotheses on (the mean of) returns are neutral for the evolution of net wealth inequality, the differential between returns and productivity (r-g) parameters are crucial in affecting the dynamics of disposable income due to cumulated effect on capital incomes shares.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.microsimulation.org/ijm/v6_2/_IJM_i6_2_Tedeschi_Pisano_Mazzaferro_Morciano
Download Restriction: no

Article provided by International Microsimulation Association in its journal International Journal of Microsimulation.

Volume (Year): 6 (2013)
Issue (Month): 2 ()
Pages: 76-122

as
in new window

Handle: RePEc:ijm:journl:v:6:y:2013:i:2:p:76-122
Contact details of provider: Web page: http://www.microsimulation.org/ijm/

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Michael Hurd & Susann Rohwedder, 2008. "The Retirement-Consumption Puzzle: Actual Spending Change in Panel Data," Working Papers 563, RAND Corporation Publications Department.
  2. John Laitner & Dan Silverman, 2005. "Estimating Life—Cycle Parameters from Consumption Behavior at Retirement”," Working Papers wp099, University of Michigan, Michigan Retirement Research Center.
  3. Giovanni D'Alessio & Ivan Faiella, 2002. "Non-response behaviour in the Bank of Italy�s Survey of Household Income and Wealth," Temi di discussione (Economic working papers) 462, Bank of Italy, Economic Research and International Relations Area.
  4. Tullio Jappelli & Franco Modigliani, 1998. "The Age-Saving Profile and the Life-Cycle Hypothesis," CSEF Working Papers 09, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:ijm:journl:v:6:y:2013:i:2:p:76-122. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Gijs Dekkers)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.