How Do Pensions Affect Household Wealth Accumulation?

Most analyses of pension effects on saving behavior use an empirical specification derived from a very simple version of the life cycle model, with a fixed retirement age, a perfect capital market, isoelastic or quadratic preferences, and a " unitary " specification of household preferences. My empirical analysis relaxes several of these strong assumptions. The results indicate that estimates of the effects of pensions on household wealth accumulation are somewhat sensitive to specification. For example, the effect of the accumulated balance in Defined Contribution plans for women is around .20 and significantly different from zero, while the effect for men is about .02. This difference is obscured when the household DC balance is used. The effects of Defined Benefit pension wealth and Social Security wealth are estimated to be quite different from the effects of Defined Contribution balances in some cases. Overall, the results are fairly consistent across specifications in showing very small effects of pensions on household wealth.