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Private Pensions, Retirement Wealth and Lifetime Earnings

Author

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  • Jie Zhou

    (Bank of Canada)

  • James MacGee

    (UWO)

Abstract

This paper investigates the effect of private pensions on the retirement wealth distribution. We incorporate stochastic private pension coverage into a calibrated life-cycle model with stochastic earnings. Private pensions lead to higher net worth inequality at retirement, which is closer to the inequality observed in the PSID than a model without private pensions. However, the offset effect of private pension wealth on net worth is much larger in the model than in the data. We find that taxation and inflation can largely account for the difference.

Suggested Citation

  • Jie Zhou & James MacGee, 2014. "Private Pensions, Retirement Wealth and Lifetime Earnings," 2014 Meeting Papers 181, Society for Economic Dynamics.
  • Handle: RePEc:red:sed014:181
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    References listed on IDEAS

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    1. Huggett, Mark & Ventura, Gustavo, 2000. "Understanding why high income households save more than low income households," Journal of Monetary Economics, Elsevier, vol. 45(2), pages 361-397, April.
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    6. McCARTHY, DAVID, 2003. "A life-cycle analysis of defined benefit pension plans," Journal of Pension Economics and Finance, Cambridge University Press, vol. 2(02), pages 99-126, July.
    7. Huggett, Mark, 1996. "Wealth distribution in life-cycle economies," Journal of Monetary Economics, Elsevier, vol. 38(3), pages 469-494, December.
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    Cited by:

    1. Claudio Campanale & Marcello Sartarelli, 2018. "Life-cycle Wealth Accumulation and Consumption Insurance," Working papers 055, Department of Economics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino.

    More about this item

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions

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