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Asset Holdings and the Life Cycle

  • Mervyn A. King
  • Louis Dicks-Mireaux
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    Empirical studies of the life cycle savings model have tended to rej ect the hypothesis of a "hump-shaped" pattern for the wealth-age profile. In this paper we show, using new data on net worth for 12,734 families, that there is evidence that wealth declines after retirement provided that we control for differences in permanent income and take account of sample selection bias. The estimated rates of decumulation are consistent with a life cycle model in which there is uncertainty about the date of death.

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    File URL: http://www.nber.org/papers/w0614.pdf
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    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 0614.

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    Date of creation: Jan 1981
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    Publication status: published as King, M. A. and Dicks-Mireaux, L-D. L. "Asset Holdings and the Life Cycle." Economic Journal, Vol. 92, No. 366 (June 1982), pp. 247-267.
    Handle: RePEc:nbr:nberwo:0614
    Note: PE
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    1. Melino, Angelo, 1982. "Testing for Sample Selection Bias," Review of Economic Studies, Wiley Blackwell, vol. 49(1), pages 151-53, January.
    2. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January.
    3. Levhari, David & Mirman, Leonard J, 1977. "Savings and Consumption with an Uncertain Horizon," Journal of Political Economy, University of Chicago Press, vol. 85(2), pages 265-81, April.
    4. Kotlikoff, Laurence J, 1979. "Testing the Theory of Social Security and Life Cycle Accumulation," American Economic Review, American Economic Association, vol. 69(3), pages 396-410, June.
    5. Diamond, P. A., 1977. "A framework for social security analysis," Journal of Public Economics, Elsevier, vol. 8(3), pages 275-298, December.
    6. Eden, Benjamin & Pakes, Ariel, 1981. "On Measuring the Variance-Age Profile of Lifetime Earnings," Review of Economic Studies, Wiley Blackwell, vol. 48(3), pages 385-94, July.
    7. Hall, Robert E, 1978. "Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 971-87, December.
    8. Davies, James B, 1981. "Uncertain Lifetime, Consumption, and Dissaving in Retirement," Journal of Political Economy, University of Chicago Press, vol. 89(3), pages 561-77, June.
    9. Greene, William H, 1981. "Sample Selection Bias as a Specification Error: Comment," Econometrica, Econometric Society, vol. 49(3), pages 795-98, May.
    10. Atkinson, A B, 1971. "The Distribution of Wealth and the Individual Life-cycle," Oxford Economic Papers, Oxford University Press, vol. 23(2), pages 239-54, July.
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