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Aspects of savings, wealth, portfolio choice, and inequality in the life cycles of German households [Elektronische Ressource] / Mathias Sommer

296 pages
Publié par :
Ajouté le : 01 janvier 2009
Lecture(s) : 19
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Aspects of Savings, Wealth,
Portfolio Choice, and Inequality
in the Life-Cycles
of German Households




Inauguraldissertation
zur Erlangung des akademischen Grades
eines Doktors der Wirtschaftswissenschaften
der Universität Mannheim



Mathias Sommer







vorgelegt im Frühlingssemester 2009
Referent: Prof. Axel Börsch-Supan, Ph.D.
Korreferent: Prof. Dr. Joachim Winter
Abteilungssprecher: Prof. Dr. Enno Mammen
Tag der mündlichen Prüfung: 01.07.2009
Acknowledgements

During my thesis I have received support and encouragement by many people and institutions. Most
important have certainly been my supervisors, the colleague researchers and the staff at MEA, as well
as my family and friends. But also others outside this inner circle have contributed to the successful
completion of this work. While some are not named in these lines, none of those dear friends’
support is forgotten.
Foremost, I want to thank Axel Börsch-Supan, my supervisor, for the opportunity to write my thesis
at MEA, his always quick and helpful comments at different stages of my work, and his patience.
Anette Reil-Held, the head of my research unit, always had an open door for questions of all kind. I
have profited substantially from her experience by sharpening the description of my results. Joachim
Winter, my second supervisor, has provided the conceptual ideas for one of the projects and has
advised me on important aspects of this dissertation. Further, I am grateful to the members of the
MEA seminar for their challenging questions and lots of constructive feedback.
A number of other people have supported me along the way and I am especially grateful to Jim
Smith, Michael Hurd and Susann Rohwedder, whose experience has helped me enormously to solve
challenging parts of my analyses. Special thanks for many fruitful and inspiring discussions goes to
Daniel Schunk, with whom I have spent many long evenings in either of our adjacent offices, helping
each other with the respective challenges in our projects. Likewise, I appreciate the inspiring
discussions I had with Martin Salm, Michael Ziegelmeyer, and Tilman Eichstädt on different parts of
my thesis. Further, I would like to thank Isabella Nohe for her support on all administrative aspects
around my work and Esther Steinmetz for her help and commitment in preparing a harmonized
dataset from the EVS cross-sections. For providing the data for my analyses and their availability for
questions I thank the Federal Statistical Office and the German Pension Fund, represented by
Heidrun Wolter and Michael Stegmann.
I cannot end without thanking my parents for their continuous support throughout my studies and
this thesis. Especially the unshakably positive attitude of my mother towards life is an inspiring
example and has always been a most valuable kind of support that never needed many words.
Finally, I thank Maresa for her patience, understanding, support and encouragement during the past
years.

Mathias Sommer
Contents


INTRODUCTION...............................................................................................................1



CHAPTER 1: ARE GERMANS REALLY NOT DISSAVING AT OLD AGE OR ARE
WE JUST NOT SEEING IT?

I. INTRODUCTION ......................................................................................................... 15
II. THE GERMAN SAVINGS PUZZLE........................................................................... 18
III. GERMAN SAVINGS AND WEALTH DATA AND THE IMPORTANCE OF
SELECTION EFFECTS....................................................................................................25
III.1 The EVS sample...........................................................................................................................................25
III.2 Evidence for differential mortality in the EVS synthetic panel............................................................27
III.3 Evaluating the EVS sample based on administrative data.....................................................................35
IV. SELECTION EFFECTS IN THE AGE-TRAJECTORIES OF WEALTH AND
SAVINGS ............................................................................................................................39
IV.1 Conceptual considerations for estimating corrected age-trajectories...................................................39
IV.2 The re-weighting procedures......................................................................................................................41
IV.3 Evidence for synthetic cohort effects and initial sample effects ..........................................................44
IV.4 Life-cycle trajectories of singles and non-singles ....................................................................................48
V. CONCLUSION..............................................................................................................54



CHAPTER 2: TRENDS IN GERMAN HOUSEHOLDS’ PORTFOLIO BEHAVIOR –
ASSESSING THE IMPORTANCE OF AGE- AND COHORT-EFFECTS

I. INTRODUCTION .........................................................................................................67
II. DATA .............................................................................................................................70
II.1 Financial Accounts ........................................................................................................................................70
II.2 The German Income and Expenditure Survey (EVS).............................................................................71
III. MACRO TRENDS.......................................................................................................77
III.1. Financial wealth growth .............................................................................................................................77
III.2 Trends in the portfolio allocation (Financial Accounts)........................................................................78
III.3 Trends in participation rates and portfolio shares (EVS)......................................................................81 IV. TRENDS AT THE AGE- AND COHORT-LEVEL ..................................................84
IV.1 Trends and differences in age-groups .......................................................................................................84
IV.2 Facts and figures at the cohort level..........................................................................................................88
IV.3 The Deaton-Paxson decomposition..........................................................................................................92
V. CONCLUSION.............................................................................................................101



CHAPTER 3: SAVINGS MOTIVES AND THE EFFECTIVENESS OF TAX
INCENTIVES – AN ANALYSIS BASED ON THE DEMAND FOR LIFE
INSURANCE IN GERMANY

I. INTRODUCTION ........................................................................................................115
II. LIFE INSURANCE IN GERMANY...........................................................................119
II.1 Market overview.......................................................................................................................................... 119
II.2 Market structure and investor characteristics......................................................................................... 121
II.3 Taxation and life insurance products....................................................................................................... 123
III. THEORETICAL CONSIDERATIONS....................................................................131
III.1 General relevance of the demand for life insurance products ........................................................... 131
III.2 Savings motives ......................................................................................................................................... 131
III.3 Tax incentives ............................................................................................................................................ 135
IV. DATA .......................................................................................................................... 137
V. EMPIRICAL RESULTS .............................................................................................. 139
V.1 Historical developments at the cohort level ........................................................................................... 139
V.2 Regression analysis...................................................................................................................................... 145
VI. CONCLUSION .......................................................................................................... 158



CHAPTER 4: UNDERSTANDING THE TRENDS IN INCOME, CONSUMPTION,
AND WEALTH INEQUALITY AND HOW IMPORTANT ARE LIFE-CYCLE
EFFECTS?

I. INTRODUCTION ....................................................................................................... 175
II. CONCEPTUAL CONSIDERATIONS ABOUT INEQUALITY ............................. 177
II.1 Income.......................................................................................................................................................... 177
II.2 Consumption............................................................................................................................................... 178
II.3 Wealth........................................................................................................................................................... 178
III. DATA.......................................................................................................................... 180 IV. TRENDS IN INEQUALITY IN GERMANY.......................................................... 182
IV.1 Trends in household income, consumption and wealth ..................................................................... 182
IV.2 Trends in inequality................................................................................................................................... 184
V. DECOMPOSING THE TRENDS IN INEQUALITY.............................................. 189
V.1 The importance of sociodemographics for cross-sectional inequality ............................................... 191
V.2 Evolution of inequality over the life-cycle .............................................................................................. 196
VI. RELATING THE EXPANSION OF WEALTH INEQUALITY OVER THE LIFE-
CYCLE TO SAVINGS, ASSET ALLOCATION AND INHERITANCES ................... 202
VI.1 A parsimonius model of wealth accumulation ..................................................................................... 203
VI.2 Estimating stylized life-cycle profiles of wealth accumulation........................................................... 203
VI.3 Results for a broadly based cohort ......................................................................................................... 206
VI.4 Age-profiles in wealth accumulation by source.................................................................................... 209
VII. CONCLUSION......................................................................................................... 219



CHAPTER 5 – TECHNICAL APPENDIX: IMPUTATION AND HARMONIZATION
OF INCOME, CONSUMPTION, SAVINGS, AND WEALTH DATA FROM THE
GERMAN INCOME AND EXPENDITURE SURVEY (EVS)

I. INTRODUCTION ....................................................................................................... 237
II. IMPUTATION............................................................................................................ 239
II.1 Imputation of the early cross-sections (1978-1988) .............................................................................. 240
II.2 Imputation of the cross-sections 1998 and 2003................................................................................... 246
III. HARMONIZATION OF EVS DATA....................................................................... 255
III.1 Income ........................................................................................................................................................ 255
III.2 Wealth ......................................................................................................................................................... 261
III.3 Consumption ............................................................................................................................................. 262
III.4 Savings......................................................................................................................................................... 265
IV. CONCEPTUAL CHANGES IN THE QUESTIONNAIRE AND WAYS TO DEAL
WITH THE RESULTING ISSUES ................................................................................ 267
IV.1 Switching from annual to quarterly household diaries ........................................................................ 267
IV.2 Changes to the sampling threshold ........................................................................................................ 273
















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