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Retirement wealth, earnings risks, and intergenerational links

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  • Lei Shao
  • Jie Zhang

Abstract

This paper investigates the accumulation and distribution of retirement wealth in a dynastic model with earnings risks, longevity uncertainties, and borrowing constraints. It resolves the wealth indeterminacy problem across generations in dynastic families by introducing a transaction cost for intergenerational transfers. It captures the pattern of inter vivos transfers, the relationship between wealth and earnings, and wealth inequality in the US data. Social security lowers precautionary savings by redistributing income from families with high earnings or short‐lived parents to others, thus reducing investment, the growth rate in income per capita, inequality in retirees' consumption, and the wealth‐earnings correlation.

Suggested Citation

  • Lei Shao & Jie Zhang, 2024. "Retirement wealth, earnings risks, and intergenerational links," Economic Inquiry, Western Economic Association International, vol. 62(4), pages 1494-1519, October.
    • Handle: RePEc:bla:ecinqu:v:62:y:2024:i:4:p:1494-1519
    DOI: 10.1111/ecin.13247
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