What Accounts for the Variation in Retirement Wealth Among U.S. Households?

Stanford University Working Paper 97-035

58 Pages Posted: 2 Feb 1998

See all articles by B. Douglas Bernheim

B. Douglas Bernheim

Stanford University - Department of Economics; National Bureau of Economic Research (NBER)

Jonathan S. Skinner

Dartmouth College - Department of Economics; National Bureau of Economic Research (NBER)

Steven Aric Weinberg

Government of the United States of America - Financial Markets Section

Multiple version iconThere are 2 versions of this paper

Date Written: 1997

Abstract

Household survey data consistently depict large variations in saving and wealth, even among households with similar socio-economic characteristics. Within the context of the life cycle hypothesis, families with identical lifetime resources might choose to accumulate different levels of wealth for a variety of reasons, including variation in time preference rates, risk tolerance, exposure to uncertainty, relative tastes for work and leisure at advanced ages, income replacement rates, and so forth. These factors can be divided into a small number of classes, each with a distinctive implication concerning the relation between accumulated wealth and the shape of the consumption profile. By examining this relation empirically, one can test for the presence or absence of particular factors. Using the Panel Study of Income Dynamics and the Consumer Expenditure Survey, we find very little support for life cycle models that rely on the above factors to explain wealth variation. The data are, however, consistent with "rule of thumb" or "mental accounting" theories of wealth accumulation.

JEL Classification: E21

Suggested Citation

Bernheim, B. Douglas and Skinner, Jonathan S. and Weinberg, Steven Aric, What Accounts for the Variation in Retirement Wealth Among U.S. Households? (1997). Stanford University Working Paper 97-035. Available at SSRN: https://ssrn.com/abstract=48653 or http://dx.doi.org/10.2139/ssrn.48653

B. Douglas Bernheim (Contact Author)

Stanford University - Department of Economics ( email )

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Jonathan S. Skinner

Dartmouth College - Department of Economics ( email )

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National Bureau of Economic Research (NBER) ( email )

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Steven Aric Weinberg

Government of the United States of America - Financial Markets Section ( email )

United States

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