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Saving Motives over the Life-Cycle

Author

Listed:
  • Svetlana Pashchenko

    (University of Georgia)

  • Ponpoje Porapakkarm

    (National Graduate Institute for Policy Studies)

Abstract

Three key drivers of savings are life-cycle, precautionary, and bequest motives. What is their relative quantitative importance? We revisit this question focusing on the role of preferences and institutions. We address the challenge of disentangling the effects of different saving motives on one's decisions by considering many aspects of people's behavior both before and after retirement. We illustrate why this approach is informative about the underlying preference parameters, and hence allows us to uncover the relative strength of different motives. Our decomposition exercises reveal that bequest motive is the key driver of savings starting from the middle-age and long before retirement. We also find that life-cycle motive and precautionary motive due to medical expense shocks play a minor role. The former result is due the crowding out effect of Social Security. The latter is due to the combined effect of health insurance and the means-tested transfers.

Suggested Citation

  • Svetlana Pashchenko & Ponpoje Porapakkarm, 2025. "Saving Motives over the Life-Cycle," Working Papers 2025-008, Human Capital and Economic Opportunity Working Group.
    • Handle: RePEc:hka:wpaper:2025-008
    Note: M
    as

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    File URL: http://humcap.uchicago.edu/RePEc/hka/wpaper/Pashchenko_Porapakkarm_2025_saving-motives-life-cycle.pdf
    File Function: First version, July 15, 2025
    Download Restriction: no
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    More about this item

    Keywords

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    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions

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