The Effects of Pensions on Household Wealth: A Reevaluation of Theory and Evidence
This paper examines the extent to which households offset pension wealth with reductions in other wealth. Systematic econometric biases imply that the estimated offsets in previous empirical studies are smaller than the true offset and may even have the wrong sign. New empirical estimates that do not correct for the biases generate little offset between pensions and other wealth. Estimates that correct for the biases show substantially more offset (a smaller impact of pensions on overall saving) than in most previous studies. The estimates also indicate that the effects of pensions on wealth vary significantly across households.