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|Title:||Essays on Household Savings and Finances|
|Keywords:||household, savings, finances, retirees, income, taxation, economic,|
|Abstract:||<p> My doctoral dissertation is composed of an introductory chapter followed by five independent chapters on household savings and finances.</p> <p> After the introductory chapter, the second chapter investigates the living standards of Canadian retirees and the adequacy of their financial preparations. We explore the responses of Canadian retirees to subjective survey questions administrated in General Social Surveys and in the 1975 Retirement Survey. Our results show that a significant portion of Canadians report enjoying life more after retirement compared to before retirement. Moreover, in 2002, three quarters of retired Canadians indicated being at least as satisfied with their finances as they were in the year prior to retirement. The most significant correlate of financial dissatisfaction that our analysis uncovers is involuntary retirement and, in particular, involuntary retirement associated with poor health.</p> <p> The third chapter revisits a long standing question of whether households with higher lifetime income save a larger fraction of their income. The major difficulty in empirically assessing the relationship between lifetime incomes and saving rates is finding a credible proxy for lifetime income. Taking advantage of the unique characteristics of the Canadian Family Expenditure Survey data, we construct reliable lifetime income proxies. Our empirical analysis suggests that the estimated relationship between saving rates and lifetime incomes is sensitive to the instrument used to proxy lifetime income. Nevertheless, our preferred estimates indicate that, except for the poorest households (who simply do not save), saving rates do not differ substantially across lifetime income groups. </p> <p> The fourth chapter examines the effect of taxation on households' portfolio allocation decisions. The key challenge in empirically assessing this relation is to find a substantial and plausibly exogenous source of variation in marginal tax rates. We use variation in marginal tax rates across households with the same total earnings, which arise in progressive income tax systems with individual taxation. Employing the Canadian Survey of Household Finances, we find statistically significant but economically modest responses to differential taxation.</p> <p> The fifth chapter investigates the problems associated with the estimation of intertemporal allocation parameters via linearized Euler Equations. We solve and simulate life-cycle consumption models in different economic environments and perform Monte Carlo experiments with these simulated data. Our results suggest that problems associated with the estimation of linearized Euler equations are strongly related to the assumed economic environments. In particular, the validity and relevance of conventional instruments used in the estimation depend on the concavity of the underlying policy rules, which in turn follows from features of the economic environment.</p> <p> The final chapter reviews the economic literature on the saving behavior of lower income households. Our discussion focuses on the motives shaping the saving behavior of low-income households. In addition to the standard economic framework used for analysis of this kind, the Life-Cycle/Permanent Income Hypothesis, we also discuss insights from "behavioral" economics. We review the international evidence on a variety of policies designed to stimulate savings among low income households.</p>|
|Appears in Collections:||Open Access Dissertations and Theses|
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