The Age-Wealth Profile and the Life-Cycle Hypothesis: A Cohort Analysis with a Time Series of Cross-Sections of Italian Households

Tullio Jappelli ()

No 1251, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Existing estimates of the age-wealth profile use panel or cross-sectional data. Panels with wealth data are rare, and plagued by measurement errors and sample attrition. Cross-sectional data require strong identifying assumptions. This paper represents the first attempt to use repeated cross-sectional data to test one of the central implications of the life-cycle theory, i.e. the extent to which the elderly run down accumulated assets. Using the 1984-93 Italian Survey of Household Income and Wealth, the paper shows that failing to control for the influence of cohort effects leads to substantial bias in the estimate of the age-wealth profile. Once cohort effects are taken into account, the results indicate that households accumulate assets until they are 70 years old; afterwards the estimated average annual rate of wealth decumulation is about 6%. A basic prediction of the life-cycle model, that the cohort effect increases from older to younger cohorts, is strongly supported by the data. The results also uncover considerable population heterogeneity: the rates of wealth decumulation are much lower for rich households and households headed by individuals with higher education.

Keywords: Life-cycle Model; Repeated Cross-sections; Wealth Accumulation (search for similar items in EconPapers)
JEL-codes: E21 (search for similar items in EconPapers)
Date: 1995-10
References: Add references at CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=1251 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: THE AGE‐WEALTH PROFILE AND THE LIFE‐CYCLE HYPOTHESIS: A COHORT ANALYSIS WITH A TIME SERIES OF CROSS‐SECTIONS OF ITALIAN HOUSEHOLDS (1999)
Working Paper: The Age-Wealth Profile and The Life-Cycle Hypothesis: a Cohort Analysis with a Time Series of Cross-Sections of Italian Households (1999)
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:cpr:ceprdp:1251

Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... ers/dp.php?dpno=1251

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().