Abstract
In this paper, we analyze the wealth accumulation and saving behavior of the retired elderly in Italy using micro data from the “Survey of Italian Households’ Income and Wealth,” a panel survey of households conducted every two years by the Bank of Italy. We find that, on average, the retired elderly in Italy are decumulating their wealth (dissaving) but that their wealth decumulation rates are much slower than expected. Moreover, we also find that more than 40 percent of the retired elderly in Italy are continuing to accumulate wealth and that more than 80 percent are doing positive amounts of saving. Thus, the Wealth Decumulation Puzzle (the tendency of the retired elderly to decumulate their wealth more slowly than expected) appears to apply in the case of Italy, as it does in most other countries, before as well as after the Global Financial Crisis. Moreover, our regression analysis of the determinants of the wealth accumulation and saving behavior of the retired elderly in Italy suggests that the lower than expected wealth decumulation rates and dissaving of the retired elderly in Italy is due largely to intergenerational transfers (bequests and inter vivos transfers) and saving for precautionary purposes, especially the former. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.
Highlights
The central tenet of the life-cycle model is that people work, earn income, and save when young and retire and dissave when old
Our regression analysis of the determinants of the wealth accumulation and saving behavior of the retired elderly in Italy suggests that respondents with bequest motives and those saving for precautionary purposes show higher wealth accumulation rates and higher amounts of saving than other respondents, which suggests that the lower than expected wealth decumulation rates and dissaving of the retired elderly in Italy is due largely to intergenerational transfers and saving for precautionary purposes, especially the former
Our descriptive statistics suggest that both bequest motives and precautionary saving are important in the case of Italy and that both appear to have a substantial impact on the wealth accumulation and saving behavior of the retired elderly in Italy, especially the former, but we need to do a regression analysis to determine whether these results hold even after controlling for other variables
Summary
The central tenet of the life-cycle model is that people work, earn income, and save (accumulate wealth) when young and retire and dissave (decumulate wealth) when old. Puzzle” (the tendency of the retired elderly to decumulate their wealth more slowly than expected) applies in the case of Italy It is one of the first papers to shed light on the relative importance of bequest motives and precautionary saving as determinants of the wealth accumulation and saving behavior of the retired elderly in. Jappelli and Modigliani (2003) do a detailed analysis of the age-saving profiles and age-wealth profiles of Italian households and find that discretionary wealth (exclusive of pension wealth) declines in old age, at least after the age of 65, but that discretionary saving remains positive throughout the life cycle (at least until age 80) if it is calculated as disposable income minus consumption These findings, taken as a whole, strongly suggest that the “Wealth Decumulation Puzzle” applies in the case of. In “Theoretical considerations”, we discuss theoretical considerations; in “The estimation model”, we explain the estimation model we use for our regression analysis of the determinants of the wealth accumulation and saving behavior of the retired elderly in Italy; in “Data source and sample selection”, we explain the data source and sample selection criteria we use for our analysis; in “Descriptive statistics”, we present and discuss some descriptive statistics; in “Estimation results”, we present and discuss our estimation results; and “Conclusion” is a concluding section that summarizes our findings and explores the policy implications of our findings
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