PROJECT OVERVIEW

The Size and Composition of Wealth Holdings in the United States, Italy, and the Netherlands
Arie Kapteyn and Constantijn Panis

Why do annuity income and accumulated wealth vary considerably across retired households? What are the implications of individual control over retirement funds for income and wealth variation? Which subpopulations might benefit from targeted educational programs? Answering these questions requires greater knowledge about household resource and wealth management. This knowledge has been slow to accrue, in part because, within a country, many explanatory variables vary hardly at all or covary in a way that makes it hard to disentangle their separate influence.

Panis and Kapteyn exploit cross-country variation in income and wealth patterns to learn more about retirement saving and portfolio allocation behavior. They focus on the United States, the Netherlands, and Italy. These three countries vary in many respects, including the amount of income uncertainty households face, the functioning of capital markets, individual discretion to plan retirement income, the role of housing wealth, and fiscal treatment of capital income.

Equivalently helpful data sources are also available for all three countries. The HRS is complemented by analogous surveys in the Netherlands and Italy. These surveys have each been collecting data on wealth from thousands of households for the last 8 to 14 years. In addition, all three surveys collect information on expectations, saving motives, risk aversion, etc.

Panis and Kapteyn start with the prevailing theory that consumers try to equalize the marginal utility of consumption over the life cycle. They extend the theory to account for responses to factors such as uncertainty, bequest motives, and transaction costs. While substantial differences exist in the degree of riskiness of portfolios across the three countries, Panis and Kapteyn find that these differences cannot be explained by the generosity and certainty of expected retirement income. They conclude that institutional arrangements and the functioning of capital markets may play an important role.