The impact of wealth on consumption and retirement behaviour in the UK.
Discussion paper: UBS Pensions series 005,
Financial Markets Group, London School of Economics and Political Science, London, UK.
Housing and pension wealth are shown to be important determinants of personal sector consumption and retirement behaviour in the UK. Housing and state pension wealth have a positive effect on consumption, while private pension wealth promotes greater savings. Greater private defined benefit pension wealth encourages earlier retirement, while greater de¯ned contribution pension wealth has the e®ect of delaying retirement. State pension wealth appears to have no effect on the retirement decision. Other variables relating to income, labour market and demographic status and spillovers from other sectors are also shown to be important. The consumption equation forecasts the late 1980s boom and the early 1990s slump in the UK better than other models that disregard housing and pension wealth. A particularly important cause of the boom was the huge private pension fund surpluses that accrued as a result of the stock market boom of the 1980s.
||© 2002 The Author
||Merton model, Consumption, Retirement, Financial wealth, Housing wealth, Pension wealth, Human capital
|Library of Congress subject classification:
||H Social Sciences > HB Economic Theory
|Journal of Economic Literature Classification System:
||C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C53 - Forecasting and Other Model Applications
C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C51 - Model Construction and Estimation
G - Financial Economics > G2 - Financial Institutions and Services > G23 - Pension Funds; Other Private Financial Institutions
J - Labor and Demographic Economics > J2 - Time Allocation, Work Behavior, and Employment Determination and Creation; Human Capital; Retirement > J26 - Retirement; Retirement Policies
C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C52 - Model Evaluation and Selection
E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Employment, and Investment > E21 - Macroeconomics: Consumption; Saving; Aggregate Physical and Financial Consumer Wealth
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