Working Paper Series, Sveriges Riksbank (Central Bank of Sweden)
Peter van Santen
Uncertain pension income and household saving
Abstract: This paper investigates the relationship between household
saving and pensions, and estimates both the displacement effect of pensions
on private saving and the precautionary saving effect due to uncertainty in
pension income. I estimate the savings equation derived from a lifecycle
model featuring income uncertainty using survey data for Dutch households,
with subjective expectations on pension benefits and uncertainty.
Exploiting exogenous variation due to pension fund performance, I find that
households save significantly more due to uncertainty in pension income.
Not controlling for uncertainty biases the estimated displacement effect of
pensions on private savings towards zero.
Keywords: Precautionary saving; Displacement effect; Subjective expectations; (follow links to similar papers)
JEL-Codes: D91; H55; J26; (follow links to similar papers)
41 pages, October 1, 2016
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