Understanding Why High Income Households Save More Than Low Income Households

Mark Huggett and Gustavo Ventura

No 9701, Working Papers from Centro de Investigacion Economica, ITAM

Abstract: This paper investigates why high income households save on average a higher fraction of income than do low income households in US cross-section data. The three explanations considered are (1) age differences across households, (2) temporary earnings shocks and (3) the structure of social security payments. We use a calibrated life-cycle model to evaluate the quantitative importance of these explanations. We find that age and the structure of social security payments are quantitatively important in replicating the pattern of average savings rates and income found in US cross-section data. Surprisingly, temporary shocks turn out to be of secondary importance.

Keywords: Distribution; Savings; Life Cycle (search for similar items in EconPapers)
JEL-codes: D3 D91 E13 (search for similar items in EconPapers)
Pages: 40 pages
Date: 1997-01
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Journal Article: Understanding why high income households save more than low income households (2000)
Working Paper: Understanding why high income households save more than low income households (1995)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cie:wpaper:9701

Access Statistics for this paper

More papers in Working Papers from Centro de Investigacion Economica, ITAM Contact information at EDIRC.
Bibliographic data for series maintained by Diego Dominguez ().