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Retirement Wealth and Lifetime Earnings

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  • Hendricks, Lutz A.

Abstract

This article argues that a satisfactory theory of wealth inequality should account not only for the marginal distribution of wealth, but also for the joint distribution of wealth and earnings. The paper describes the joint distribution of retirement wealth and lifetime earnings in the Panel Study of Income Dynamics. It then evaluates the ability of a stochastic life-cycle model to account for key features of this distribution. The life-cycle model fails to account for three key features of the data. (i) The correlation between lifetime earnings and retirement wealth is too high. (ii) The wealth gaps between earnings rich and earnings poor households are too large. (iii) Wealth inequality among households with similar lifetime earnings is too small. Models in which households differ in rates of return or time preferences account much better for the joint distribution of retirement wealth and lifetime earnings.

Suggested Citation

  • Hendricks, Lutz A., 1970. "Retirement Wealth and Lifetime Earnings," Staff General Research Papers Archive 12668, Iowa State University, Department of Economics.
  • Handle: RePEc:isu:genres:12668
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    1. Moschini, GianCarlo & LAPAN, HARVEY E & Sobolevsky, Andrei, 1999. "Roundup Ready Soybeans and Welfare Effects in the Soybean Complex," ISU General Staff Papers 199909010700001325, Iowa State University, Department of Economics.
    2. Moschini, GianCarlo & Lapan, Harvey E. & Sobolevsky, Andrei, 2000. "Roundup Ready Soybeans and Welfare Effects in the Soybean Complex," Staff General Research Papers Archive 1799, Iowa State University, Department of Economics.
    3. Bullock, D. S. & Desquilbet, M., 2002. "The economics of non-GMO segregation and identity preservation," Food Policy, Elsevier, vol. 27(1), pages 81-99, February.
    4. Murray Fulton & Konstantinos Giannakas, 2004. "Inserting GM Products into the Food Chain: The Market and Welfare Effects of Different Labeling and Regulatory Regimes," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(1), pages 42-60.
    5. José Benjamin Falck-Zepeda & Greg Traxler & Robert G. Nelson, 2000. "Surplus Distribution from the Introduction of a Biotechnology Innovation," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(2), pages 360-369.
    6. Giancarlo Moschini & Harvey Lapan & Andrei Sobolevsky, 2000. "Roundup ready® soybeans and welfare effects in the soybean complex," Agribusiness, John Wiley & Sons, Ltd., vol. 16(1), pages 33-55.
    7. GianCarlo Moschini & Harun Bulut & Luigi Cembalo, 2005. "On the Segregation of Genetically Modified, Conventional and Organic Products in European Agriculture: A Multi-market Equilibrium Analysis," Journal of Agricultural Economics, Wiley Blackwell, vol. 56(3), pages 347-372.
    8. Harvey E. Lapan & Giancarlo Moschini, 2004. "Innovation and Trade with Endogenous Market Failure: The Case of Genetically Modified Products," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(3), pages 634-648.
    9. Andrei Sobolevsky & GianCarlo Moschini & Harvey Lapan, 2005. "Genetically Modified Crops and Product Differentiation: Trade and Welfare Effects in the Soybean Complex," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(3), pages 621-644.
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    1. repec:red:issued:16-340 is not listed on IDEAS
    2. repec:oup:oxecpp:v:69:y:2017:i:4:p:1101-1119. is not listed on IDEAS
    3. Mariacristina De Nardi & Giulio Fella, 2017. "Saving and Wealth Inequality," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 26, pages 280-300, October.
    4. Frank Cowell & Brian Nolan & Javier Olivera & Philippe Van Kerm, 2017. "Wealth, Top Incomes and Inequality," LWS Working papers 24, LIS Cross-National Data Center in Luxembourg.
    5. Gang Sun, 2013. "Consumption Inequality and Discount Rate Heterogeneity," Discussion Paper Series, Department of Economics 201318, Department of Economics, University of St. Andrews.
    6. De Nardi, Mariacristina & Yang, Fang, 2014. "Bequests and heterogeneity in retirement wealth," European Economic Review, Elsevier, vol. 72(C), pages 182-196.
    7. Fang Yang, 2005. "Accounting for the heterogeneity in retirement wealth," Working Papers 638, Federal Reserve Bank of Minneapolis.
    8. Bingley, Paul & Martinello, Alessandro, 2017. "The Effects of Schooling on Wealth Accumulation Approaching Retirement," Working Papers 2017:9, Lund University, Department of Economics.
    9. Mariacristina De Nardi, 2015. "Quantitative Models of Wealth Inequality: A Survey," NBER Working Papers 21106, National Bureau of Economic Research, Inc.
    10. Frank A. Cowell & Philippe Kerm, 2015. "Wealth Inequality: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 29(4), pages 671-710, September.
    11. Almås, Ingvild & Mogstad, Magne, 2010. "Older or Wealthier? The Impact of Age Adjustment on Cross-Sectional Inequality Measures," Discussion Paper Series in Economics 9/2010, Department of Economics, Norwegian School of Economics.
    12. repec:eee:dyncon:v:79:y:2017:i:c:p:126-153 is not listed on IDEAS
    13. Ferreira, Pedro Cavalcanti & Gomes, Diego B.P., 2017. "Health care reform or more affordable health care?," Journal of Economic Dynamics and Control, Elsevier, pages 126-153.

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