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Saving for Retirement: Household Bargaining and Household Net Worth

  • Shelly Lundberg
  • Jennifer Ward-Batts

Traditional economic models of savings treat the household as a single individual, and do not allow for the separate preferences of and possible conflicts of interest between husbands and wives. Since wives are typically younger than their husbands and life expectancy for women exceeds that for men, wives may prefer to save more for retirement than do their husbands. This suggests that households in which wives have greater relative bargaining power may accumulate greater net worth as they approach retirement. We explore the importance of bargaining in marriages of older couples by examining the empirical relationship between the net worth of couples in the first wave of the Health and Retirement Survey and factors that may affect the relative bargaining power of husbands and wives, such as control over income sources, relative age, and relative education. We find that measures of long-term relative bargaining power of wives have a positive effect on the household's wealth, even when controlling for other factors. In general, the realized effects of reforms intended to increase private saving for retirement may depend on how these reforms affect household bargaining relationships, as well as how they affect individual incentives to save.

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Paper provided by Department of Economics at the University of Washington in its series Discussion Papers in Economics at the University of Washington with number 0026.

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Date of creation: Jan 2000
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Handle: RePEc:fth:washer:0026
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  1. Richard Disney & Paul Johnson & Gary Stears, 1998. "Asset wealth and asset decumulation among households in the Retirement Survey," Fiscal Studies, Institute for Fiscal Studies, vol. 19(2), pages 153-174, May.
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  3. Browning, Martin, 1995. "Saving and the intra-household distribution of income: an empirical investigation," Ricerche Economiche, Elsevier, vol. 49(3), pages 277-292, September.
  4. Michael D. Hurd, 1999. "Mortality Risk and Consumption by Couples," Working Papers 99-03, RAND Corporation Publications Department.
  5. Browning, M. & Bourguignon, F. & Chiappori, P.A. & Lechene, V., 1992. "Incomes and Outcomes: A structural Model of Intra-Household Allocation," DELTA Working Papers 92-23, DELTA (Ecole normale supérieure).
  6. Shelly Lundberg & Elaina Rose, 1999. "The Determinants of Specialization within Marriage," Working Papers UWEC-2005-07, University of Washington, Department of Economics.
  7. Bergstrom, T. & Bagnoli, M., 1991. "Courtship as a waiting game," The Warwick Economics Research Paper Series (TWERPS) 386, University of Warwick, Department of Economics.
  8. Smith, J.P., 1996. "Racial and Ethnic Differences in Wealth in the Health and Retirement Study," Papers 96-12, RAND - Reprint Series.
  9. Gustman, Alan L & Steinmeier, Thomas L, 2000. "Retirement in Dual-Career Families: A Structural Model," Journal of Labor Economics, University of Chicago Press, vol. 18(3), pages 503-45, July.
  10. Blau, David M., 1997. "Social security and the labor supply of older married couples," Labour Economics, Elsevier, vol. 4(4), pages 373-418, December.
  11. Lundberg, S. & Pollak, R.A., 1991. "Separate Spheres Bargaining and the Marriage Market," Working Papers 91-08, University of Washington, Department of Economics.
  12. Michael Baker, 1999. "The Retirement Behavior of Married Couples: Evidence from the Spouse's Allowance," NBER Working Papers 7138, National Bureau of Economic Research, Inc.
  13. B. Douglas Bernheim & Jonathan Skinner & Steven Weinberg, 1997. "What Accounts for the Variation in Retirement Wealth Among U.S. Households?," NBER Working Papers 6227, National Bureau of Economic Research, Inc.
  14. Chiappori, Pierre-Andre, 1992. "Collective Labor Supply and Welfare," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 437-67, June.
  15. Martin Browning, 1994. "The Saving Behaviour of a Two Person Household," Department of Economics Working Papers 1994-01, McMaster University.
  16. Shelly Lundberg & Robert A. Pollak, 1996. "Bargaining and Distribution in Marriage," Journal of Economic Perspectives, American Economic Association, vol. 10(4), pages 139-158, Fall.
  17. Blau, David M, 1998. "Labor Force Dynamics of Older Married Couples," Journal of Labor Economics, University of Chicago Press, vol. 16(3), pages 595-629, July.
  18. Banks, James & Blundell, Richard & Tanner, Sarah, 1998. "Is There a Retirement-Savings Puzzle?," American Economic Review, American Economic Association, vol. 88(4), pages 769-88, September.
  19. Michael D. Hurd & Kathleen McGarry, 1993. "Evaluation of Subjective Probability Distributions in the HRS," NBER Working Papers 4560, National Bureau of Economic Research, Inc.
  20. Gustman, Alan L. & Steinmeier, Thomas L., 1999. "Effects of pensions on savings: analysis with data from the health and retirement study," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 50(1), pages 271-324, June.
  21. Chiappori, Pierre-Andre, 1988. "Rational Household Labor Supply," Econometrica, Econometric Society, vol. 56(1), pages 63-90, January.
  22. Michael D. Hurd, 1990. "The Joint Retirement Decision of Husbands and Wives," NBER Chapters, in: Issues in the Economics of Aging, pages 231-258 National Bureau of Economic Research, Inc.
  23. Lundberg, Shelly & Pollak, Robert A, 1994. "Noncooperative Bargaining Models of Marriage," American Economic Review, American Economic Association, vol. 84(2), pages 132-37, May.
  24. Manser, Marilyn & Brown, Murray, 1980. "Marriage and Household Decision-Making: A Bargaining Analysis," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 21(1), pages 31-44, February.
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