Abstract
We use a calibrated life-cycle model to evaluate why high income households save as a group a much higher fraction of income than do low income households in US cross-section data. We find that (1) age and relatively permanent earnings differences across households together with the structure of the US social security system are sufficient to replicate this fact, (2) without social security the model economies still produce large differences in saving rates across income groups and (3) purely temporary earnings shocks of the magnitude estimated in US data alter only slightly the saving rates of high and low income households.
Original language | English (US) |
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Pages (from-to) | 361-397 |
Number of pages | 37 |
Journal | Journal of Monetary Economics |
Volume | 45 |
Issue number | 2 |
DOIs | |
State | Published - Apr 2000 |
Externally published | Yes |
Keywords
- D3
- D91
- Distribution
- E13
- Life cycle
- Saving
ASJC Scopus subject areas
- Finance
- Economics and Econometrics