Do the Rich Save More

By Karen E. Dynan, Jonathan S. Skinner, Stephen P. Zeldes. 2000

473 citations recorded by the source corpus.

The issue of whether higher lifetime income households save a larger fraction of their income is an important factor in the evaluation of tax and macroeconomic policy. Despite an outpouring of research on this topic in the 1950s and 1960s, the question remains unresolved and has since received little attention. This paper revisits the issue, using new empirical methods and the Panel Study on Income Dynamics, the Survey of Consumer Finances, and the Consumer Expenditure Survey. We first consider the various ways in which life cycle models can be altered to generate differences in saving rates by income groups: differences in Social Security benefits, different time preference rates, non-homothetic preferences, bequest motives, uncertainty, and consumption floors. Using a variety of instruments for lifetime income, we find a strong positive relationship between personal saving rates and lifetime income. The data do not support theories relying on time preference rates, non-homothetic preferences, or variations in Social Security benefits. Instead, the evidence is consistent with models in which precautionary saving and bequest motives drive variations in saving rates across income groups. Finally, we illustrate how models that assume a constant rate of saving across income groups can yield erroneous predictions.

View Paper: https://www.semanticscholar.org/paper/90268248cd9319b39ac8737a2a897b96129c66fd

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Citations in the corpus

“Just give me a number!” Practical values for the social discount rate (2004, background): “7 Dynan et al. (2000) find that marginal propensities to save out of disposable income vary between 2.”
Long-Run Stockholder Consumption Risk and Asset Returns (2009, background): “This implication is consistent with micro-level evidence which suggests that wealthy households (e.g., stockholders) have higher savings rates (Dynan, Skinner, and Zeldes (2004), Carroll(2000), Bosworth, Burtless, and Sabelhaus (1991)).”
Health Risk and Portfolio Choice (2008, methodology): “There is a wellestablished literature on precautionary saving, and several articles examine how future health expenditures may increase saving (Hubbard, Skinner, and Zeldes 1994; Palumbo 1999; Dynan, Skinner, and Zeldes 2004).”
Savings After Retirement: A Survey (2016, unknown): “Thus, even at older ages, richer people save more, a finding first documented by Dynan et al. (2004) for the entire life cycle.”
Real Estate and the Macroeconomy (2000, background): “See, for example, Gentry and Hubbard (2000), Parker (1999), Quadrini (1999), Car- roll (2000), and Dynan, Skinner, and Zeldes (2000).”
Luxury Goods and the Equity Premium (2004, unknown): “…of basic consumption, as measured in the Panel Study of Income Dynamics (PSID) or the Consumer Expenditure Survey (CEX), is more equally distributed across households than the distribution of permanent income or wealth (see Dynan, Skinner, and Zeldes (2000) and Huggett and Ventura (2000)).”
Banking on Trust: How Debit Cards Enable the Poor to Save More (2017, methodology): “30Our measure of the ow of savings is imperfect, but is commonly used in the literature (e.g., Dynan, Skinner, and Zeldes, 2004).”
The Joy of Giving or Assisted Living? Using Strategic Surveys to Separate Public Care Aversion from Bequest Motives (2011, unknown): “Second, the answers to this question suggests a lower public care aversion than do the responses to the earlier locked-box questions.(19) The response to the qualitative question was clear-cut.”
Das Human Kapital: A Theory of the Demise of the Class Structure (2004, unknown): “The level of output per-worker in period t+ 1, yt+1, as follows from (1) and (26), is yt+1 = A[(1− τ t)λbt ]α[h(τ tλbt )]1−α for t ∈ [et,bt).”
From Physical to Human Capital Accumulation: Inequality and the Process of Development (2004, background): “The preference structure is designed such that, consistently with empirical evidence, the marginal propensity to save and to bequeath increases with wealth (e.g., Tomes (1981), Menchik and David (1983), and Dynan, Skin-ner and Zeldes (2000)).”