Intra-Household Allocation of Non-Mandatory Retirement Savings

Abstract

Traditionally, households have been seen as acting as a single unit when it comes to savings. Although this might be correct for some parts of household savings, we question the correctness of the unitary model with respect to non-mandatory retirement savings. To answer this question we analyze the intra-household allocation of retirement savings between partners in Germany. First, the decision to save at all is analyzed using a seemingly unrelated bivariate probit model, showing that the possession of retirement saving accounts among spouses is positively correlated, hinting at a “crowding-in” of saving accounts. However, this could be only due to some tax reasons. Thus, we analyze additionally the interaction of savings between spouses using three-stage least squares, allowing for endogeneity between the spouse’s savings. These results additionally show a “crowding-in” of total retirement saving amounts between spouses, probably due to some “recognition effect”. The unitary model of household decision making can thus be rejected with respect to retirement savings.