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The Effects of Public Pensions on Private Wealth : Evidence on the German Savings Puzzle

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Klump, Rainer; Kim, Sangho

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Abstract Based on German panel data between 1984 and 1999 we test for the interaction of social security benefits and private wealth formation. In a simple life-cylce model benefits from public pension systems should displace equal amounts of private retirement accumulation. Our estimate for the offset effect, corrected for several possible measurement biases, is much lower, however, than expected from pure life-cycle considerations and less than comparable estimates for the US and the UK. This result thus supports other evidence on a particular German savings puzzle which might be due to market imperfections and/or bounded rational behavior.
Classification Methods and Techniques of Data Collection and Data Analysis, Statistical Methods, Computer Methods; Social Security
Free Keywords Life-cycle model; Ricardian equivalence; pension systems; panel estimations; Germany
Document language English
Publication Year 2010
Page/Pages p. 1917-1926
Journal Applied Economics, 42 (2010) 15
Status Postprint; peer reviewed
Licence PEER Licence Agreement (applicable only to documents from PEER project)