Uncertain Pension Income and Household Saving

23 Pages Posted: 17 Oct 2012 Last revised: 9 Mar 2016

Multiple version iconThere are 2 versions of this paper

Date Written: November 2, 2015

Abstract

I study the relationship between household saving and pensions, and estimate both the displacement effect of pensions on private saving and the precautionary saving effect due to uncertainty in pension income. Using a lifecycle framework, the consumption function depends on expected pension benefits and pension risk. I estimate the savings equation implied by the model using survey data for Dutch households, with subjective expectations on pension benefits and uncertainty. Exploiting exogenous variation due to pension fund performance, I show that savings decrease significantly with expected pension income, and that households save more due to uncertainty in pension income.

Keywords: Precautionary saving, Displacement effect

JEL Classification: D91, H55

Suggested Citation

van Santen, Peter, Uncertain Pension Income and Household Saving (November 2, 2015). Netspar Discussion Paper No. 10/2012-034, Available at SSRN: https://ssrn.com/abstract=2161922 or http://dx.doi.org/10.2139/ssrn.2161922

Peter Van Santen (Contact Author)

Sveriges Riksbank ( email )

Brunkebergstorg 11
Stockholm, SE-103 37
Sweden
004687870569 (Phone)
00468210531 (Fax)

Netspar ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

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