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Pension wealth and household savings in Europe: Evidence from SHARELIFE

  • Santen, Peter van
  • Alessie, Rob
  • Angelini, Viola

    (Groningen University)

We use recently collected retrospective survey data to estimate the displacement effect of pension wealth on household savings. The third wave of the Survey of Health, Ageing and Retirement in Europe, SHARELIFE, collects information on the entire job history of the respondent, a feature missing in most previous studies. We show that addressing measurement error problems is crucial to estimate the displacement effect when using survey data. We find that each euro of pension wealth is associated with a 47 (61) cent decline in non?pension wealth using robust (median) regression. In the presence of biases from measurement errors and omitted (unobserved)variables, we estimate a lower bound to the true offset between 17% and 30%, significantly different from zero. Instrumental variables regression estimates, although less precise, suggest full displacement.

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File URL: http://irs.ub.rug.nl/ppn/356620824
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Paper provided by University of Groningen, Research Institute SOM (Systems, Organisations and Management) in its series Research Report with number 12012-EEF.

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Date of creation: 2012
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Handle: RePEc:dgr:rugsom:12012-eef
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  1. Arie Kapteyn & R. Alessie & Annamaria Lusardi, 2003. "Explaining the wealth holdings of different cohorts: productivity growth and social security," Working Papers 01-03, Utrecht School of Economics.
  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. Johan Almenberg & Jenny Säve-Söderbergh, 2011. "Financial Literacy and Retirement Planning in Sweden," CeRP Working Papers 112, Center for Research on Pensions and Welfare Policies, Turin (Italy).
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  7. Fornero, Elsa & Monticone, Chiara, 2011. "Financial literacy and pension plan participation in Italy," Journal of Pension Economics and Finance, Cambridge University Press, vol. 10(04), pages 547-564, October.
  8. Lusardi, Annamaria & Mitchell, Olivia S., 2011. "Financial literacy around the world: an overview," Journal of Pension Economics and Finance, Cambridge University Press, vol. 10(04), pages 497-508, October.
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  11. 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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  15. Dicks-Mireaux, Louis & King, Mervyn, 1984. "Pension wealth and household savings: Tests of robustness," Journal of Public Economics, Elsevier, vol. 23(1-2), pages 115-139.
  16. Michael Hurd & Pierre‐Carl Michaud & Susann Rohwedder, 2012. "The Displacement Effect of Public Pensions on the Accumulation of Financial Assets," Fiscal Studies, Institute for Fiscal Studies, vol. 33(1), pages 107-128, 03.
  17. 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.
  18. Gary V. Engelhardt & Anil Kumar, 2011. "Pensions and Household Wealth Accumulation," Journal of Human Resources, University of Wisconsin Press, vol. 46(1), pages 203-236.
  19. Klapper, Leora & Panos, Georgios A., 2011. "Financial literacy and retirement planning: the Russian case," Journal of Pension Economics and Finance, Cambridge University Press, vol. 10(04), pages 599-618, October.
  20. Feldstein, Martin & Pellechio, Anthony, 1979. "Social Security and Household Wealth Accumulation: New Microeconometric Evidence," The Review of Economics and Statistics, MIT Press, vol. 61(3), pages 361-68, August.
  21. 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.
  22. Orazio P. Attanasio & Susann Rohwedder, 2003. "Pension Wealth and Household Saving: Evidence from Pension Reforms in the United Kingdom," American Economic Review, American Economic Association, vol. 93(5), pages 1499-1521, December.
  23. Almenberg, Johan & Säve-Söderbergh, Jenny, 2011. "Financial literacy and retirement planning in Sweden," Journal of Pension Economics and Finance, Cambridge University Press, vol. 10(04), pages 585-598, October.
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