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Savings decisions under life-time and earnings uncertainty:

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  • Rodepeter, Ralf

    (Sonderforschungsbereich 504)

  • Winter, Joachim

    () (Mannheim Research Institute for the Economics of Aging (MEA))

Abstract

We analyze a model of life-cycle savings decisions which allows for both life-time and income uncertainty. We then simulate life-cycle saving rates based on empirical income processes estimated from West German household data. Our main findings are, first, that allowing for mortality risk improves the life-cycle model's predictions slightly, and second, that simulated saving rates still fail to match their empirical counterparts. While our model correctly predicts differential peak saving rates during working life for three household types that face different income processes, it cannot explain an important salient feature of saving in Germany: Empirically, there is almost no post-retirement dissaving, while our life-cycle model predicts substantial dissaving even though we control for the generous German pension system which results in relatively high post-retirement income.

Suggested Citation

  • Rodepeter, Ralf & Winter, Joachim, 1998. "Savings decisions under life-time and earnings uncertainty:," Sonderforschungsbereich 504 Publications 98-58, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
  • Handle: RePEc:xrs:sfbmaa:98-58
    Note: Financial Support from Deutsche Forschungsgemeinschaft, SFB 504 at the University of Mannheim, is gratefully acknowledged.
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    File URL: http://www.sfb504.uni-mannheim.de/publications/dp98-58.pdf
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    1. Börsch-Supan, Axel & Reil-Held, Anette & Rodepeter, Ralf & Schnabel, Reinhold & Winter, Joachim, 1999. "Ersparnisbildung in Deutschland : Meßkonzepte und Ergebnisse auf Basis der EVS," Papers 99-02, Sonderforschungsbreich 504.
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    Cited by:

    1. Susanne Pech, 2004. "Portfolio decisions on life annuities and financial assets with longevity and income uncertainty," Economics working papers 2004-14, Department of Economics, Johannes Kepler University Linz, Austria.
    2. Börsch-Supan, Axel & Reil-Held, Anette & Rodepeter, Ralf & Schnabel, Reinhold & Winter, Joachim, 1999. "Ersparnisbildung in Deutschland: Meßkonzepte und Ergebnisse auf Basis der EVS," Sonderforschungsbereich 504 Publications 99-02, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
    3. Börsch-Supan, Axel & Reil-Held, Anette & Rodepeter, Ralf & Schnabel, Reinhold & Winter, Joachim, 2000. "Household Savings in Germany," Discussion Papers 577, Institut fuer Volkswirtschaftslehre und Statistik, Abteilung fuer Volkswirtschaftslehre.
    4. Zhiyang Jia & Weizhen Zhu, 2012. "The effect of pension wealth on private savings. Results from an extended life cycle model," Discussion Papers 697, Statistics Norway, Research Department.
    5. Rodepeter, Ralf & Winter, Joachim, 1999. "Rules of thumb in life-cycle savings models," Sonderforschungsbereich 504 Publications 99-81, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
    6. Axel Börsch-Supan & Anette Reil-Held & Ralf Rodepeter & Reinhold Schnabel & University of Mannheim & Germany, 2000. "Household Savings in Germany," Macroeconomics 0004053, EconWPA.
    7. Annamaria Lusardi, 2002. "Saving Viewed from a Cross-National Perspective," MEA discussion paper series 02024, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
    8. Kelly D. Edmiston & Richard M. Bird, 2004. "Taxing Consumption in Jamaica: The GCT and the SCT," International Tax Program Papers 0414, International Tax Program, Institute for International Business, Joseph L. Rotman School of Management, University of Toronto.

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