Rohwedder, Susann; (2003) Pension wealth and household saving decisions: Microeconometric evidence from Britain and US. Doctoral thesis (Ph.D), UCL (University College London).

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Abstract

Life-cycle theory suggests that household saving and pensions interact in an important way. This thesis investigates microeconomic evidence on savings and pension wealth using data from the UK and the US. The first two chapters are based on the UK Family Expenditure Survey. Chapter 1 provides a thorough descriptive analysis of observed age profiles of saving and related variables in cross-section and synthetic panel. It further discusses in detail UK pension arrangements and their evolution over time. Chapter 2 investigates the structural relationship between pension saving and discretionary private savings using three major UK pension reforms as natural experiments. Economic theory is applied to model the response of each individual household. The empirical analysis integrates both time-series and cross- sectional variation to identify the behavioural response. The earnings-related tier of the pension scheme is found to have a negative impact on private savings with relatively high substitution elasticities; the impact of the flat-rate tier is not significantly different from zero. The third and fourth chapter analyze two individual-level measures of pension wealth in the US Health and Retirement Study: one derived from the self-reports and the other derived using employer information. These measures are very complex regarding input variables and their processing in the underlying computations. Chapter 3 gives a thorough assessment of the contents of the two measures, both from a conceptual and a measurement point of view. Chapter 4 assesses their validity on the basis of their power to explain three economic outcomes. A naive analysis suggests that both measures have considerable explanatory power. A more sophisticated analysis that takes into account the details of their construction suggests that the employer-derived measure has only weak explanatory power relative to the self-reports, as would be predicted by the findings in Chapter 3.

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