Understanding why high income households save more than low income households

Mark Huggett, Gustavo Ventura

Research output: Contribution to journalArticle

48 Scopus citations

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 languageEnglish (US)
Pages (from-to)361-397
Number of pages37
JournalJournal of Monetary Economics
Volume45
Issue number2
DOIs
StatePublished - Apr 2000

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Keywords

  • D3
  • D91
  • Distribution
  • E13
  • Life cycle
  • Saving

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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