Lifetime Earning and Heterogeneity in Retirement Wealth: the Role of Bequests, Minimum Consumption, and Social Security
The data show large dispersion in household's wealth holding at retirement. In addition, the empirical correlation between household lifetime earnings and retirement wealth is much lower in the data than in many quantitative models. This paper quantifies and analyzes the implications of a life cycle model with intergenerational links (in the form of voluntary bequest motives and intergenerational transmission of ability) that also explicitly allows for defined benefit pensions, history-dependent social security, and a government-provided minimum consumption floor. The key finding is that this model goes a long way toward matching the observed wealth differences at retirement and their correlation with lifetime incomes.
|Date of creation:||2012|
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