Understanding why high income households save more than low income households

Mark Huggett and Gustavo Ventura

No 106, Discussion Paper / Institute for Empirical Macroeconomics from Federal Reserve Bank of Minneapolis

Abstract: This paper investigates why high income households in the United States save on average more than low income households in cross-section data. The three explanations considered are (1) age differences across households, (2) temporary earnings shocks, and (3) the structure of transfer payments. We use a calibrated life-cycle model to evaluate the quantitative importance of these explanations and find that age and the structure of transfers are quantitatively important in producing the cross-section pattern of United States savings rates. Temporary shocks are of secondary importance.

Keywords: Income; Saving and investment (search for similar items in EconPapers)
Date: 1995
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Citations: View citations in EconPapers (9)

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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 (1997)
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