The Displacement Effect of Public Pensions on the Accumulation of Financial Assets.

TitleThe Displacement Effect of Public Pensions on the Accumulation of Financial Assets.
Publication TypeJournal Article
Year of Publication2012
AuthorsHurd, MD, Michaud, P-C, Rohwedder, S
JournalFiscal Studies
Volume33
Issue1
Pagination107-128
Date Published2012 Mar 01
ISSN Number0143-5671
KeywordsFinances, Older Adults, Pensions, Retirement Planning and Satisfaction
Abstract

The generosity of public pensions may depress private savings and provide incentives to retire early. While there is plenty of evidence supporting the latter effect, there remains considerable controversy whether public pensions crowd out private savings. This paper uses international micro-datasets collected over recent years to investigate whether public pensions displace private savings. The identification strategy relies not only on cross-country differences in generosity but also on differences in the progressivity or non-linearity of pension formulas across countries. We estimate that an extra dollar of pension wealth depresses accumulated financial assets around the time of retirement by 22 cents. An extra ten thousand dollars in public pension wealth reduces the average retirement age by roughly one month which implies an elasticity of retirement years with respect to pension wealth of -0.15.

DOI10.1111/j.1475-5890.2012.00154.x
Alternate JournalFisc Stud
Citation Key8954
PubMed ID23606775
PubMed Central IDPMC3630514
Grant ListP01 AG008291 / AG / NIA NIH HHS / United States
P01 AG029409 / AG / NIA NIH HHS / United States
R01 AG040213 / AG / NIA NIH HHS / United States
R01 HD069609 / HD / NICHD NIH HHS / United States