How Patient are Consumers? Evidence from Luxembourg Wealth Study

In his paper on wealth accumulation and individual lifecycle, Tony Atkinson (1971) used lifecycle models to measure inequalities between and within age (sex) groups. He has mentioned the importance of pension in reducing wealth inequality. Following Atkinson, many authors and international institutions recognise that the development of pension systems is the solution for reducing inequalities and preventing poverty in elderly. However, the voluntarily participation of all the workers to pension system, especially to the third pillar of the system, is really controversial. A critical issue in analysing pension saving is the unobserved heterogeneity in household time preferences. This article displays this heterogeneity by building average ages-profiles of consumption, income and wealth in eight countries: Australia, Finland, France, Greece, Hungary, Italy, United Kingdom, and USA. These profiles are constructed across different socioeconomic groups of households. The findings show a high correlation between consumption and income revealing the lack of foresight of the household of the studied societies. Furthermore, we confirm Atkinson’s results (1971) about wealth distribution; we show the heterogeneity of wealth accumulation across socio-demographic group of households. By using wealth accumulation profiles we conclude that male, high educated, self-employed and risk seekers households are wealthier and forward looking. Our results also show that the presence of children in the households make them wealthier and forward looking.