The effects of public pensions on private wealth: evidence on the German savings puzzle

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 effe...

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Bibliographic Details
Published in:Applied economics 2010-06, Vol.42 (15), p.1917-1926
Main Authors: Kim, Sangho, Klump, Rainer
Format: Article
Language:English
Subjects:
Bias
Economic models
Germany
International comparisons
Life cycles
National income
Pensions
Social security
Social security financing
Social security funds
Studies
Wealth
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Summary: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 behaviour.
ISSN:0003-6846
1466-4283
DOI:10.1080/00036840701749027