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Income and Wealth of Older American Households: Modeling Issues for Public Policy Analysis

Alan L. Gustman and F. Thomas Juster

This paper is concerned with the economic behavior determining the income and wealth of older American households, and with our capacity to analyze the effects of public policies determining their income and wealth. It begins by providing a structure for relating the outcomes of interest to leading behavioral models. This is followed by descriptive statistics indicating the relative importance of the major components of income and wealth. The paper then assesses the current state of models, describing what is known about the behavior of individuals and firms that affects income and wealth determination, what is not known, and what kinds of models and data are needed to do an adequate job of understanding income and wealth outcomes and the effects of policies meant to influence these outcomes. The final part of the paper considers an array of policy changes that might be expected to influence the income and wealth of older households.

CONCEPTUAL OVERVIEW

Figure 2-1 indicates the major components of income and wealth of the older population and the elements of behavior of individuals, of markets, and in the public sector that determine these income and wealth outcomes. Box A repre

The authors are grateful to the National Institute on Aging for research support. Helpful comments by Gary Engelhardt, Anna Lusardi, Andrew Samwick, Jonathan Skinner, Tim Smeeding, and Steve Venti are very much appreciated.



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Assessing Knowledge of Retirement Behavior 2 Income and Wealth of Older American Households: Modeling Issues for Public Policy Analysis Alan L. Gustman and F. Thomas Juster This paper is concerned with the economic behavior determining the income and wealth of older American households, and with our capacity to analyze the effects of public policies determining their income and wealth. It begins by providing a structure for relating the outcomes of interest to leading behavioral models. This is followed by descriptive statistics indicating the relative importance of the major components of income and wealth. The paper then assesses the current state of models, describing what is known about the behavior of individuals and firms that affects income and wealth determination, what is not known, and what kinds of models and data are needed to do an adequate job of understanding income and wealth outcomes and the effects of policies meant to influence these outcomes. The final part of the paper considers an array of policy changes that might be expected to influence the income and wealth of older households. CONCEPTUAL OVERVIEW Figure 2-1 indicates the major components of income and wealth of the older population and the elements of behavior of individuals, of markets, and in the public sector that determine these income and wealth outcomes. Box A repre The authors are grateful to the National Institute on Aging for research support. Helpful comments by Gary Engelhardt, Anna Lusardi, Andrew Samwick, Jonathan Skinner, Tim Smeeding, and Steve Venti are very much appreciated.

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Assessing Knowledge of Retirement Behavior FIGURE 2-1 Framework for analysis from the perspective of an individual's decisions. sents a matrix of income and wealth outcomes. The outcomes are delineated by type of income, but the matrix is meant to represent the full dimension of time and cohort effects, as well as the various sources of heterogeneity in outcomes. Box B lists the behavioral decisions. They include the basic decisions of labor supply and savings, as well as other behaviors that must receive attention for a full understanding of wealth and income. Below that in Box C is an array of market-determined outcomes that are taken as exogenous to the individual, such as the features of the pension plan, determined by the employer subject to market constraints. The right-hand box, D, lists some of the basic categories for the

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Assessing Knowledge of Retirement Behavior policies that will be discussed. The arrows indicate that each box helps to determine elements in other boxes. A central focus of the paper is the behavior of individuals and the efforts of firms to accommodate the behavior and preferences of individuals. Our aim is to determine whether the analyses of the various dimensions of behavior indicated in Figure 2-1 are sufficiently reliable to support policy analysis, and if not, what additional is research is required to improve the quality of the available behavioral models. As a result of our analysis, we conclude that among the key dimensions of behavior, we have greater confidence in the retirement models for use in policy analysis than in models of saving or pensions. Models of savings and pensions continue to wrestle with behavioral issues that remain unresolved at a more fundamental level than the questions that confront retirement modeling. But we also find that none of the models of behavior in any one area takes sufficient account of the behavior along other dimensions. These behaviors may interact in important ways, and most of the literature ignores these interactions. COMPONENTS OF INCOME AND WEALTH OF OLDER HOUSEHOLDS To measure the importance of the major components of income and wealth, we begin with descriptive data on income and wealth outcomes for recent cohorts. The relevant data include the Current Population Survey (CPS), where we use 1992 income data analyzed by Grad (1994); the Survey of Income and Program Participation (SIPP), where we use 1991 wealth data analyzed by Poterba, Venti, and Wise (1994); the Health and Retirement Survey (HRS), where we use income data from 1991 and wealth data from 1992; and the Asset and Health Dynamics Among the Oldest Old (AHEAD) survey, where we use income data from 1992 and wealth data from 1993. These data sets are complementary. CPS covers the entire age range, as does SIPP, but the income and wealth data from these surveys, especially the wealth data, tend to be underestimates relative to either HRS or AHEAD; in both HRS and AHEAD, new survey technologies have been introduced that result in substantially smaller biases resulting from missing data components. But while HRS and AHEAD appear to have data of somewhat higher quality, they represent particular cohorts and do not include a full range of age distributions. HRS includes the birth cohorts of 1931 to 1941, while AHEAD includes the birth cohorts of 1923 and before. The data in Table 2-1 provide a useful overview of the sources of income and wealth for households that are in a transition stage between work and retirement—those 65 to 69 years of age. For these households, earnings comprise a little under 30 percent of total income; Social Security comprises another 30 percent, while pensions and income from assets each comprise a bit under 20 percent. On the asset side, if both Social Security income flows and pension

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Assessing Knowledge of Retirement Behavior TABLE 2-1 Sources of Money Income and Wealth for 65- to 69-Year Olds Income and Wealth Source Share of Aggregate Income of Aged Units (%) Average Wealth From Indicated Source as a % of Total Net Worth Earnings 28.9   Social Security 29.9 31.9 Pensions 18.8 19.9 Financial and other assets 18.7 27.8 Public assistance 0.7   Other income 3.1   Housing   20.8 Total 100.1 100.4   SOURCE: Income percentages are from Grad (1994, Table VII.1). Grad's figures are based on the 1992 CPS. Wealth percentages are computed from Poterba, Venti, and Wise (1994, Table 1). Their data are from SIPP and are reported for 1991. income flows are capitalized, the two make up a little over half of total wealth, with the other half coming from conventionally measured net worth—the sum of financial and other assets and housing equity. From these data we can see the extent of the underestimation problem in the measurement of assets: Assets in Table 2-1 are based on data from SIPP, where conventionally defined net worth (the total of financial and other assets plus housing equity) for these 65- to 69-year-olds had a mean value of roughly $150,000 in 1991; SIPP households aged 55 to 64, a younger age group that typically has smaller net worth than the 65-to-69 group, had a mean 1991 total of about $140,000. In contrast, the HRS data on net worth for households between 51 and 61, where asset holdings would be expected to be smaller still, had a mean 1992 value of approximately $240,000—a figure that is approximately 60 percent larger than the Table 2-1 estimate. And the AHEAD net-worth data, for an age group much older than the SIPP 65- to 69-year-olds and one that would therefore be expected to have a much lower asset level, had a 1993 mean value for conventionally defined net worth of approximately $170,000—higher than the 65- to 69-year-olds in Table 2-1. Note that the data in Table 2-1 are missing some components. For example, one would generally prefer to include imputed income from housing equity in the income definition and might well include imputed values for services provided by Medicare and Medicaid. The wealth data might include present discounted values for Supplemental Security Income, other welfare payments, and transfers. According to Hurd (1990b, Table 18), these are not negligible sources of income or wealth. It is also worth noting that although the capitalized value of future Social Security or pension benefits, which is included as part of wealth, appropriately reflects the consumption value of these assets, it represents a relatively

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Assessing Knowledge of Retirement Behavior inflexible source of economic support. To some extent that is also true of housing equity, although here the inflexibility lies as much in consumer choice as in legal or institutional constraints. But it is certainly clear that Social Security wealth cannot be bought and sold, nor can pension wealth, and while housing equity can be bought or sold, most households appear to treat housing equity as an immutable fact of economic circumstances, not an asset that can be used to smooth consumption flows in future years. An important feature of both income and wealth is their heterogeneity among households. Households are always heterogeneous in the types and amounts of income and wealth that they own, but that heterogeneity is likely to grow as households move into older age groups. And both distributions, especially the wealth distributions, are highly skewed in that medians are small relative to mean values. The heterogeneity of the income sources received by older households is documented in Tables 2-2 and 2-3. Table 2-2 shows the detailed structure of income from HRS (for age groups in their 50s), and for AHEAD (for age groups TABLE 2-2 Income Components, HRS and AHEAD, in Thousands of Dollars   Age of Household Head Income Source 51–55a 56-61a 70–74b 75–79b 80–84b 85+b Earnings 40.6 32.4 4.0 1.5 1.0 0.2 Pensions 1.0 2.8 16.6 15.9 12.4 10.4 Social Security 0.1 0.2 10.2 10.4 9.4 8.2 Private pension 0.9 2.6 6.4 4.5 3.0 2.2 Capital Income 5.1 5.9 2.1 2.9 2.6 1.8 Disability 0.4 0.6 1.1 0.8 0.7 0.8 Welfare 0.3 0.3 1.1 0.8 0.7 0.8 Unemployment 0.4 0.3 1.1 0.8 0.7 0.8 Other 0.2 0.2 1.1 0.8 0.7 0.8 Total 48.0 42.4 24.8c 21.9c 17.8c 15.7c Household members other than respondent or spouse 4.9 4.7 3.0 2.8 3.7 5.0 Total 52.9 47.1 27.8 24.7 21.5 20.7 a1991 HRS data. b1992 AHEAD data. cDerived from an independent question, not from summing the components. The sum of components is generally lower than the above total for technical reasons (mainly the use of unfolding brackets for the total income question). SOURCE: 1991 HRS data for ages 51 to 61; 1992 AHEAD data for ages 70 to 85+.

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Assessing Knowledge of Retirement Behavior TABLE 2-3 Components of Income, AHEAD Sample Income Component and Age Group Mean for Sample Mean if Greater Than Zero ($) Percentiles ($) 10 25 50 75 90 Wage Income               70–74 4,059 18,989 0 0 0 0 8,000 75–79 1,463 14,934 0 0 0 0 0 80–84 1,013 15,586 0 0 0 0 0 85+ 162 12,776 0 0 0 0 0 Capital Income               70–74 2,089 6,923 0 0 0 240 4,620 75–79 2,941 9,396 0 0 0 318 4,800 80–84 2,605 9,182 0 0 0 300 5,000 85+ 1,798 6,987 0 0 0 0 3,600 Social Security Income               70–74 10,246 10,259 4,440 6,516 9,480 13,000 15,900 75–79 10,374 10,390 4,800 6,420 9,210 12,696 16,308 80–84 9,384 9,411 4,608 6,000 8,208 11,724 14,712 85+ 8,248 8,276 4,236 5,550 7,578 9,492 12,000 Pension Income               70–74 6,404 10,660 0 0 2,680 7,218 16,080 75–79 4,539 8,647 0 0 1,200 4,644 11,604 80–84 2,964 6,714 0 0 0 2,964 9,540 85+ 2,247 6,366 0 0 0 2,247 6,900 Other Income               70–74 1,109 6,126 0 0 0 0 2,400 75–79 773 4,652 0 0 0 0 1,861 80–84 740 4,076 0 0 0 0 1,861 85+ 773 4,189 0 0 0 0 2,160 Other family Members Income               70–74 3,026 19,870 0 0 0 0 13,162 75–79 2,839 19,719 0 0 0 0 13,162 80–84 3,689 22,379 0 0 0 0 13,162 85+ 4,979 21,386 0 0 0 6,571 13,162 Total Family Income               70–74 27,778   8,280 12,460 19,304 29,723 49,200 75–79 24,754   7,428 10,374 16,539 25,004 42,374 80–84 21,515   6,528 9,398 13,992 22,561 38,352 85+ 20,723   6,564 8,400 13,000 20,476 35,064 in their 70s and 80s). Total household income is of course substantially larger for the HRS sample than for AHEAD, partly because of cohort differences in earnings but mainly because of age differences. The HRS households are about 30 years younger than the AHEAD households that are ages 80 and over, and thus there has been 30 years worth of economy-wide improvement for the HRS cohort compared with the AHEAD 80 and older cohort. In addition, the AHEAD data

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Assessing Knowledge of Retirement Behavior reflect the fact that the replacement of earnings by the sum of Social Security benefits and pensions is at much lower than a one-to-one ratio for most households. The income component data in Table 2-2 do not contain any surprises. Earnings are the dominant source of income for the HRS cohorts in their 50s, while pensions, especially Social Security, are the dominant source of income for households in the AHEAD cohorts. Earnings are relatively unimportant for households in the AHEAD age range, and the pattern of private pension income, which is about three times as high among AHEAD cohorts in the 70- to 74-year-old group as in the 85 and older group, is explainable both by cohort differences and by the growing incidence of widowhood among older households in the AHEAD cohorts. Finally, earnings of household members other than the HRS or AHEAD survey respondent and spouse are an important source of family income, especially for the oldest AHEAD cohort (those 85 years of age or older). The heterogeneity of income components for the AHEAD cohort shows up very clearly in Table 2-3, which contains sample means, means for households with positive income in a particular category, and percentile distributions. Not surprisingly, hardly any AHEAD age groups have wage income, all the way up to the 90th percentile. Equally surprising to some, capital income is zero for the entire lower half of the AHEAD distribution, is only a few hundred dollars for AHEAD cohorts up as high as the 75th percentile, and becomes a substantial sum only when we get around the 90th percentile, where the amounts are several thousand dollars rather than several hundred dollars. The only income sources that are at all widely distributed among AHEAD households are Social Security income, which virtually everyone receives, and pension income, which is received by the upper half of the distribution in the younger age cohorts and by the upper quarter in the older age cohorts. For each age category and percentile, pension income exceeds Social Security income in the AHEAD sample for only one age cohort and one of the percentiles shown—the 90th percentile for the 70-to 74-year-olds. As we note later, it looks as if this pattern will be a bit different when the HRS cohorts get to be in the AHEAD age range, although that will depend in part on changes over time in the proportion of jobs providing pensions and in the proportion of pensions that contain survivors' rights. The heterogeneity in economic status among older households is even more pronounced when we examine the data on net worth. Tables 2-A1 to 2-A7 in the Appendix contain estimates of total net worth, net worth in the form of housing equity, and net worth less housing equity for various HRS and AHEAD classifications of households. For HRS, we divide the sample into couples, single men, and single women (Table 2-A1), by racial/ethnic groups (blacks, Hispanics, and all others including whites, Table 2-A2); and by 1991 income (Table 2-A3). For the AHEAD sample, we show data for couples and singles in Table 2-A4 (total net worth) and Table 2-A5 (net worth excluding home equity), as well as for racial/ethnic groups in Tables 2-A6 (total net worth) and 2-A7 (net worth exclud-

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Assessing Knowledge of Retirement Behavior ing home equity). For the AHEAD data, we show separate estimates for four age groups: 70 to 74, 75 to 79, 80 to 84, and 85 and up. The principal message from this set of net-worth tables is that wealth is highly unevenly distributed among the older population: both in the HRS and the AHEAD samples, married couples have substantially higher levels of wealth than single men or single women, even after implicit correction for household size; the disparities are substantially larger for net worth less housing equity than for total net worth, since housing equity itself is somewhat more evenly distributed than most other assets; minority households have substantially fewer assets than whites by an order of magnitude of 4 or 5 to 1 in mean values, and an order of magnitude more like 10 to 1 for net worth less housing equity. For the AHEAD data, there are of course substantial differences by age group as well as by family composition and racial/ethnic group. In general, older households have smaller net worth, other things equal, although the differences by age are surprisingly small for couples up through the age of 80 to 84. The most striking disparities in the AHEAD data are those shown by the tabulations of net worth excluding home equity, both by family composition and by racial/ethnic group, divided according to age group. For the family composition data, fully half the single women had net financial assets excluding home equity of under $ 10,000 regardless of age—the 70-to-74 group and the 85 and older group have just about the same (minimal) assets. Single men are a little better off, but fully half of this group have under $20,000 of net worth excluding home equity. For couples, in contrast, the median net worth excluding home equity is a little over $55,000 for the 70-to-74 age group and is still about $20,000 for the 85 and older age group. As would be expected, there are some very wealthy subcategories of households in the sample: AHEAD households in the 90th percentile among couples have over $400,000 of net worth excluding home equity, and almost $600,000 net worth in total, for those with heads age 70 to 74. Even for couples age 85 and up, AHEAD households have over a quarter of a million dollars in net worth excluding home equity at the 90th percentile and over $400,000 of total net worth. For minority households in the AHEAD sample, it is essentially correct that fully half of all black and Hispanic households have close to zero net worth excluding home equity, regardless of age, and even at the 75th percentile, neither black nor Hispanic households have as much as $20,000 of net worth excluding home equity in any of the AHEAD age groups. To all intents and purposes, most minority households can be thought of as having negligible financial asset holdings in old age. Income Distribution Issues The income and wealth data show substantial disparity among households, and the disparities appear to be a bit greater for households 70 and over than for

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Assessing Knowledge of Retirement Behavior others. One way to look at issues of income distribution is to examine the economic circumstances associated with private pensions. Two alternative models might be contrasted. In one model, the existence of a private pension, since it involves a cost to the employer, provided less current income during the working years. On that model, households with substantial pensions would have had less current income than other comparably situated households; during retirement, they would be expected to have more pension income than others, but less income from capital and from Social Security benefits. In an alternative model, the market is such that jobs that carry pensions are also apt to carry higher current income than other jobs, perhaps because only those with high wage rates want pensions, given the tax advantages of pensions and the low Social Security replacement rate for high wage jobs. Hence households with pensions will have more favorable economic circumstances generally as they move toward retirement. On that model, households with substantial pension income would also be expected to have substantial capital income relative to other households (because of their higher current income while working) and to have higher Social Security benefits (again because of their more favorable current income while working). In short, an important issue is, do households with jobs that carry substantial pensions have offsetting differences in other sources of retirement income, or do the differences tend to cumulate—those with pensions having more of other forms of retirement income as well? Tables 2-4 and 2-5 show comparisons for both the HRS and the AHEAD sample. For HRS (Table 2-4), we contrast households in which both respondent and spouse have jobs with pension rights, households where one has a job with pension rights and the other a nonpension job, and households where neither has TABLE 2-4 Earnings and Capital Income by Pension Status, HRS Households Working for Pay and Not Self-Employed     Mean Values ($000) Whether Pension Income % of Cases Earnings Capital Income Total Income Singles         Yes 66.8 29.0 2.4 37.1 No 33.2 14.9 1.3 23.3 Couplesa         Both Have 57.1 64.4 4.0 75.0 One Has 34.6 49.7 2.9 62.1 Neither Has 8.3 36.7 5.3 49.2 NOTE: All categories weighted by the HRS household population weight. a Both spouses in the couple households are working.

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Assessing Knowledge of Retirement Behavior TABLE 2-5 Pension, Social Security, and Capital Income by Whether Pension Income and Age, AHEAD Householdsa Whether Pension Income % Having Pension Income Mean Pension Income ($) Mean Social Security Income ($) % Having Capital Income Mean Capital Income ($) Mean Total Income ($) All cases (N=5,457)             Yes 50.6 8,915 10,981 39 2,869 25,908 No 49.4 0 8,532 20 1,722 15,507 Age 70–74 (N=1,818)             Yes 58.3 10,340 10,964 37 2,290 28,237 No 41.7 0 8,815 20 1,979 18,053 Age 75–79 (N=1,415)             Yes 50.0 8,504 11,385 43 3,727 26,626 No 50.0 0 9,041 19 1,795 16,047 Age 80–84 (N=1,120)             Yes 42.3 6,803 10,404 39 3,443 21,092 No 57.7 0 8,200 20 1,866 14,011 Age 85+ (N=794)             Yes 34.1 6,099 9,011 39 2,773 19,064 No 65.9 0 7,202 19 1,131 11,148 NOTE: All categories weighted by the AHEAD household population weight. a All income is for respondent and spouse only. a job with pension rights although both have jobs. We also show data for singles who work, with and without pensions on their job. We tabulate current earnings for these HRS households, and also tabulate capital income. For the AHEAD households (Table 2-5), we divide the sample into households receiving some pension income versus those receiving none, and tabulate pension income, Social Security benefits, capital income, and total income for each of the AHEAD age groups. It is clear enough from the data, especially the AHEAD data, that favorable economic circumstances cumulate rather than offset. Both for the HRS age range and for the various AHEAD age ranges, households either expecting or receiving pension income have substantially higher nonpension income (capital income and job earnings in the case of HRS households, Social Security benefits and capital income in the case of AHEAD households). For the AHEAD sample, where the differences are clearest and the analysis is least ambiguous, households receiving pension income have close to twice as much total income as other households. Finally, we show a mapping of the relationship between health status and both income and wealth for HRS households (see Appendix, Figures 2-A1 to 2-A4).

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Assessing Knowledge of Retirement Behavior Although these data come from a cross section and therefore are not helpful on questions of causality, the strength of the relationship between health and wealth or health and income is quite remarkable, whether measured by relationships involving means or medians. For the net-worth measure, couples where both spouses are in either excellent or very good health have net worth in the area of $400,000, while households where both spouses are in fair or poor health tend to have net worth of less than a quarter of that. These differences are even sharper for median net worth and are almost as large for either mean or median household income. Interestingly enough, if there is any difference in the relationship between household financial variables and health for the male or female spouse, it appears that the health of the female spouse is more systematically related to the household's financial well-being than the health of the male spouse. MODELS OF INDIVIDUAL AND FIRM BEHAVIOR EXPLAINING RETIREMENT INCOME AND WEALTH This section briefly considers what we know and do not know about the dimensions of behavior that are central to an understanding of how policies affect retirement incomes and retirement wealth. The discussion covers labor supply decisions, savings behavior, pension plan determination, and the determination of Social Security income at the level of the individual. Also discussed are the behaviors determining family structures and transfers, and the demand for housing. Income from Earnings Based on Labor Supply Decisions To project earnings, it is necessary to explain patterns of labor force participation among older workers on jobs offering different wage rates.1 Thus, an important part of the approach to understanding the determination of the earnings of older individuals, and the effects of public policies on earnings, is to apply a conventional intertemporal model of labor supply and to use the labor supply outcome together with the wage to determine earnings. The conventional model for explaining labor force behavior into retirement is dynamic. Subject to a series of constraints, including the wage offer for full-time work, the wage offer for part-time work, and the rate of pension accrual (including its option value), as well as the corresponding rate of accrual in Social Security benefits and other factors, the individual reaches a decision on whether to continue working full time, part time, or not at all. In this approach, the parameters of a utility function are estimated so as to maximize the likelihood of observing the sequence of outcomes realized for each individual, subject to the constraints created by the elements of the opportunity set (Fields and Mitchell, 1984; Burtless and Moffitt, 1984, 1985; Gustman and Steinmeier, 1986b;

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Assessing Knowledge of Retirement Behavior NOTES 1.   In examining behavior from the perspective of the individual, we will take the wage offer at a given age and tenure as exogenous to the individual's decision in older age. 2.   For recent studies elaborating on the dynamic structure of the dependent variable, see Blau (1994) and Peracchi and Welch (1994). For models of retirement using a rich set of dynamic flows in the context of a dynamic programming model, see, for example, Rust (1990) and Berkovec and Stern (1991). For an analysis that incorporates the effects of incomplete annuity markets, borrowing constraints, and incomplete markets for health insurance on labor market behavior, see Rust and Phelan (1993). For inclusion in the opportunity set of the discontinuities from the option value of the pension, see Stock and Wise (1990a, 1990b) and Lumsdaine, Stock, and Wise(1990). For family retirement models, see Hurd (1990a) and Gustman and Steinmeier (1994b). For models that include further information on nonwage aspects of employment, see Gustman and Steinmeier (1986a) and Hurd and McGarry (1993a). 3.   In order to make estimation tractable, researchers have made a number of simplifications reducing the complexity of the dependent variable specification, the detail of the opportunity set, the complexity of the dynamic decisions allowed, and the richness of the econometric specification. Some inadequacies in models estimated to date have reflected limitations in the available data sets. One fundamental choice has been between nationally representative data sets that include only respondent-provided descriptions of a few elements of the pension plan, such as studies based on data from the Retirement History Study or the National Longitudinal Study of Older Men, and data sets with highly detailed employer-provided descriptions of pensions, but with very narrow samples, including the employees of only a few firms. Thus, studies using employer-provided plan descriptions have been confined to analyzing the decision to leave the firm from which the pension data had been obtained; subsequent employment experience was not observed and could not be analyzed. Nor in the studies focusing on the analysis of behavior in a few firms have there been data on family characteristics and labor market activity or detailed information on the health status of the worker. Health is simply included under the random term. Only recently have we begun to see retirement analysis based on nationally representative data that include information from employer-provided pension plan descriptions (Samwick. 1993a). But the model specification remains highly simplified compared with some of the structural analyses now available in the literature. 4.   Anderson, Gustman, and Steinmeier (1994) attribute about a quarter of the trend to the sharp lowering of early and normal retirement dates for pension eligibility and to the reduced effect of continued work on the Social Security benefit in the 1980s as compared with the incentives in the early 1970s. This type of analysis does not answer why the pension incentives were changed as they were and leaves unexplained the other three-fourths of the change in retirement behavior. 5.   One issue that has recently been subject to disagreement is the question of whether the trends in retirement are due to trends in incentives and unexpected wealth effects from the start-up and revisions of pension plans and Social Security, as implied by the work of Ippolito (1990) and others, or to trends in wages differentials and the forces underlying these trends, as implied by Peracchi and Welch (1994). If trends in retirement among older cohorts may be attributed to the effects of unexpected changes in Social Security wealth, then this raises a question. Shouldn't we expect to see the trend cease, as we did, and then strongly reverse itself as the Social Security system matured and Congress ceased granting important benefit increases after the 1970s? (Perhaps the flattening of the trend in recent years is just the beginning of a strong reversal; however, it has been 8 years since the trend ceased and no strong reversal is yet apparent.) Moreover, if changes in the wage structure due to the decline in relative and real wages of the unskilled account for the trend to earlier retirement, as Peracchi and Welch (1994) argue, why do we see the same trend to earlier retirement in the last two decades in Britain, where despite a decline in relative wages for the unskilled, real wages for the unskilled continued to increase? If higher wages are responsible for the trend to earlier retirement, why did the trend begin only after the 1930s in the United States? And more generally, why aren't these wage effects picked up by structural retirement models?

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Assessing Knowledge of Retirement Behavior 6.   The studies with the best pension measures, those obtained directly from firm-provided data, have no information on health status, for example, Fields and Mitchell (1984), Stock and Wise (1990a, 1990b), and Lumsdaine, Stock and Wise (1990, 1992a, 1992b). 7.   Savers may also be motivated by the need to finance various expenditures, such as their children's college education or the purchase of a home, or by other motivations. 8.   Hurd (1990b) also argues that consumption paths are consistent with the life-cycle model. 9.   HRS is designed to permit direct measurement of individuals' attitudes toward risk as well as their time preference and expectations regarding particular risks to, among other, the economy and to Social Security and to provide the opportunity to explore heterogeneity in these measures within the population. For a study based on the new HRS data, see Barsky et al. (1993). 10.   Smith (1994) also finds that the bequest motive is more likely to be operating among those with higher incomes. He finds much smaller effects of a belief in a bequest motive when using median repressions than when using mean regressions. 11.   As a test of the importance of the bequest motive, Hurd examines the wealth path of families with and without children and concludes that the higher rate of decumulation of wealth by those with children is evidence against the importance of the bequest motive. 12.   Hamermesh (1984) argues that asset decumulation is too rapid to sustain consumption after retirement. On the other hand, it has frequently been argued that decumulation is too slow for life-cycle motivations and that bequests will result (see Kotlikoff and Summers, 1981). 13.   Those with a pension save less than those without a pension (Smith, 1994), but there is a question about the rates at which these assets are substituted. See, for example, Bernheim and Scholz (1993) and Samwick (1994) on the relation between pension holding and nonpension wealth. See Hoynes and McFadden (1994) for evidence on the nonhousing wealth of those who do and do not own houses. 14.   One set of results suggests that although Social Security benefit changes adopted in 1983 will reduce retirement incomes by about 14 percent by the time they are fully phased in, half of the reduction will be offset by induced increases in earnings as retirement is postponed in response to the change in incentives (Gustman and Steinmeier, 1985). Another set of results suggests that accelerating the 1983 Social Security reforms to eliminate penalties from continuing work after reaching Social Security normal retirement age, or equivalently abolishing the retirement earnings test, will have only a small effect on retirement in the affected cohorts (Gustman and Steinmeier, 1991). Simulations with models fit to payroll data from selected firms (Stock and Wise, 1990a, 1990b; Lumsdaine and Wise, 1994: Wise and Woodbury, 1994) suggest that retirement incentives from Social Security are much weaker than are incentives from pensions. Other recent work focuses on the proper modeling of Social Security effects on retirement (Reimers and Honig, 1993a, 1993b; Rust and Phelan, 1993). These studies suggest that simple, mechanical models of a response to the benefit formula and earnings test are unsatisfactory, and that liquidity constraints, knowledge of the earnings test, and the nonwage characteristics of jobs (Hurd and McGarry, 1993b; Gustman, Mitchell, and Steinmeier, 1994) are important. 15.   The suggestion that workers may not fully understand the Social Security rules comes from a finding of a spike in the participation rate at the disregard amount of the Social Security earnings test (Burtless and Moffitt, 1984). The rules allow any benefit that is lost to the earnings test by someone between the ages of 62 and 65 to be recovered in future years on a roughly actuarially fair basis, so that the spike at the disregard amount would not make sense for those under 65 if they understood the rules. Analogously, incentives from Social Security should not create a spike in the retirement hazard at age 62, in that any loss to the earnings test can be recovered in future years (Hurd, 1990a). Nevertheless, in some studies there is a suggestion at age 62 of a spike in the retirement hazard that seems to be associated with Social Security. Specifically, while findings in Gustman and Steinmeier (1986b) suggest that spikes in retirement hazards can be completely attributed to actuarial incentives of pensions, Social Security, and mandatory retirement, without considering any effects of liquidity constraints, Hurd (1990b), using data from Kotlikoff and Wise (1985, 1987), finds a spike in the

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Assessing Knowledge of Retirement Behavior     retirement hazard at age 62 for workers with a pension plan that does not generate any retirement incentive at age 62. This leads Hurd to infer that liquidity effects associated with Social Security are responsible, a finding confirmed in subsequent analysis by Wise and his colleagues. Nalebuff and Zeckhauser (1985) explain why liquidity effects may also arise from pension plans that are designed for a heterogeneous work force. 16.   See Venti and Wise (1993) for a discussion and evidence of imperfect substitution between personal retirement savings and a number of other savings instruments. Venti and Wise include assets in 401(k) plans under the heading of personal targeted retirement assets, as opposed to employer-provided pension assets. See also the evidence in Samwick (1994). 17.   Studies of pension outcomes discuss the effects of certain plan differences; for example, Green (1985) and Bodie (1990) analyze the differential risk of defined benefit and defined contribution plans. Most of the empirical studies of the choices of pension outcomes are descriptive, relating pension outcomes to demographic and employment characteristics. 18.   Recent articles examining trends in pension coverage include Parsons (1991, 1993), Bloom and Freeman (1992), Turner and Beller (1992), and Even and Macpherson (1994). Other studies have tried to describe and explain trends in plan type (Clark and McDermed, 1990; Gustman and Steinmeier, 1992; Ippolito, 1995: Kruse, 1995) and to understand the forces shaping the trends in provision of pensions (Mitchell and Luzadis, 1988; Luzadis and Mitchell, 1991; Mitchell, 1992). 19.   Skinner (1993) found a negative association between housing wealth and nonhousing savings in the PSID, measuring housing values by the individual's self-report of the housing value in two periods. Hoynes and McFadden (1994) used data on housing prices in metropolitan areas and found either a very small positive association between changes in housing prices and the savings rate, or a larger one, depending on specification. When Engelhardt (1994) reestimated the results in Hoynes and McFadden using median regression, reducing the weight on outliers, he found a negative and significant effect of housing wealth on savings about the same size as the effect found by Skinner. 20.   In either case such phenomena as the bunching of retirees at the Social Security earnings test maximum are difficult to explain (see Burtless and Moffitt, 1984). 21.   Rust (1989, 1990) developed an influential model of the joint determination of savings and retirement, but that model has not been estimated. Otherwise, all of the structural models mentioned above are estimated using procedures that ignore information about savings behavior. 22.   Nalebuff and Zeckhauser (1985), Hurd (1990b), Rust and Phelan (1993), and others note that in the absence of assets, liquidity-constrained individuals will retire at 62 to obtain access to their Social Security benefits. 23.   The normal retirement age for pension covered workers in the Retirement History Study average 64.2. The early retirement age averaged 61. According to 1989 Survey of Consumer Finances data, the normal retirement age averaged 61.7 and the early retirement age averaged 54.3 (Anderson, Gustman, and Steinmeier, 1994). For data on the changes in early retirement provisions of pension plans over the past two decades, see Ippolito (1990) and Mitchell (1992). 24.   Venti and Wise (1993) find no evidence of any offset at all between pension wealth and personal financial assets, with the coefficient on the relationship being positive but insignificant. See also Bernheim and Scholz (1993), who relate savings to a qualitative indicator of pension coverage and find an indication of some substitution for those with college degrees. The analysis of the relation between pensions and savings is at an earlier stage than some other lines of research. Nevertheless, the work to date raises important questions about the substitutability between pensions and other forms of savings. 25.   These data sets and their potential use in research on retirement, savings, health, family linkages, and related issues are described in detail in a forthcoming issue of the Journal of Human Resources. 26.   These suggestion were made by Dorcas Hardy, the former head of the Social Security Administration, and continue to be made by others. For an analysis, see Gustman and Steinmeier (1991).

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Assessing Knowledge of Retirement Behavior 27.   We have not emphasized the disability system, but clearly changes in disability rules will affect incentives to save for precautionary reasons. Moreover, disability provisions may interact with early retirement provisions of pension programs affecting retirement incentives. Because the roll of the disability system has grown rapidly in recent years and the finances of that system have deteriorated, there have been a number of suggestions for change. Such changes might, for example, include tightening eligibility requirements, reducing benefits, and limiting the duration of benefits. 28.   Pension discrimination rules attempt to equalize benefits within firms. Special pension regulations pertaining to high-income employees limit the absolute size of benefits. REFERENCES Abel, A.B. 1985. Precautionary savings and accidental bequests. American Economic Review 75(4):777–791. Allen, S.G., R.L. Clark, and A.A. McDermed 1993. Pensions, bonding and lifetime jobs. Journal of Human Resources 28(3):463–481. Anderson, P.M., A.L. Gustman, and T.L. Steinmeier 1994. The Trend to Earlier Retirement Among Males. Report to the Social Security Administration. Ausink, J.A., and D.A. Wise 1993. The Military Pension, Compensation, and Retirements of U.S. Air Force Pilots. NBER Working Paper #4593. Cambridge, Mass.: National Bureau of Economic Research. Barro, R.J. 1974. Are governments bonds net wealth? Journal of Political Economy 82(6):1095–1117. Barsky, R., M. Kimball, M. Shapiro, and F.T. Juster 1993. Experimental Measures of Preferences in the HRS. Paper presented at Health and Retirement Survey Early Results Workshop, Survey Research Center, University of Michigan. Becker. G.S. 1991. A Treaties on the Family. Cambridge, Mass.: Harvard University Press. Berkovec, J.C., and S. Stern 1991. Job exit behavior of older men. Econometrica 59(1):189–210. Bernheim. B.D. 1988. Social Security benefits: An empirical study of expectations and realizations. Pp. 312–345 in R.R. Campbell and E. Lazear, eds., Issues in Contemporary Retirement. Stanford, Calif.: Hoover Institution. 1989. The timing of retirement: A comparison of expectations and realizations. Pp. 335–355 in D.A. Wise, ed., The Economics of Aging. Chicago, Ill.: University of Chicago Press. 1991. How strong are bequest motives? Journal of Political Economy 99(5):899–927. 1993. Personal Saving, Information, and Economic Literacy: New Directions for Public Policy. Unpublished manuscript. Department of Economics, Princeton University. 1994. Do saving incentives work?: A discussion of Engen, Gale and Scholz. Brookings Papers on Economic Activity 1994(1):152–156. Bernheim, B.D., and J.K. Scholz 1993. Private saving and public policy. Pp. 73–110 in J. Poterba, ed., Tax Policy and the Economy Vol. 7. Cambridge, Mass.: MIT Press. Berheim, B.D., Shleifer, and L. H. Summers 1985. The strategic bequest motive. Journal of Political Economy 96(6):1045–1076. Blau, D.M. 1994. Labor force dynamics of older men. Econometrica 62(1):117–156.

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Assessing Knowledge of Retirement Behavior Bloom, D.E., and R.B. Freeman 1992. The fall in private pension coverage in the United States American Economic Review, Papers and Proceedings 82(2):539–545. Bodie, Z. 1990. Pensions as retirement income insurance. Journal of Economic Literature 28(1):28–49. Borsch-Supan, A. 1989. Household dissolution and the choice of alternative living arrangements among elderly Americans. Pp. 119–146 in D.A. Wise, ed., The Economics of Aging. Chicago, Ill.: University of Chicago Press. 1990. A dynamic analysis of household dissolution and living arrangement transitions by elderly Americans. Pp. 89–114 in D.A. Wise, ed., Issues in the Economics of Aging. Chicago, Ill.: University of Chicago Press. Borsch-Supan, A., D. McFadden, and R. Schnabel 1993. Living Arrangements: Health and Wealth Effects. Unpublished paper. Department of Economics, University of California, Berkeley. Borsch-Supan, A., and K. Stahl 1991. Life cycle savings and consumption constraints: Theory, empirical evidence and fiscal implications. Journal of Population Economics 86:3–27. Brown, C. 1993. Early Retirement Windows: Windows of Opportunity? Defenestrations? (and Even Refenestrations…). Paper presented at Health and Retirement Survey Early Results Workshop, Survey Research Center, University of Michigan. Burkhauser, R.V. 1979. The pension acceptance decision of older workers. Journal of Human Resources 14(1):63–75. Burkhauser, R.V., K.C. Holden, and D. Feaster 1988. Incidence, timing, and events associated with poverty: A dynamic view of poverty in retirement. Journal of Gerontology 43(2):S46–S52. Burtless, G., and R.A. Moffitt 1984. The effect of Social Security benefits on the labor supply of the aged. Pp. 135–174 in H.J. Aaron and G. Burtless, eds., Retirement and Economic Behavior. Washington, D.C.: Brookings Institution. 1985. The joint choice of retirement age and post-retirement hours of work. Journal of Labor Economics 3(2):209–236. Cagan, P. 1965. The Effect of Pension Plans of Aggregate Saving: Evidence from a Sample Survey. National Bureau of Economic Research Occasional Paper 95. New York: Columbia University Press. Carroll, C.D. 1992. The buffer-stock theory of saving: Some macroeconomic evidence. Brookings Papers on Economic Activity 2:61–135. Carroll, C.D., and A.A. Samwick 1994. The Nature of Precautionary Wealth. Manuscript, National Bureau of Economic Research, Cambridge, Mass. Carroll, C.D., and L.H. Summers 1991. Consumption growth parallels income growth: Some new evidence. Pp. 305–343 in D.B. Bernheim and J.B. Shoven, eds., National Saving and Economic Performance. Chicago, Ill.: University of Chicago Press. Clark, R.L., and A.A. McDermed 1990. The Choice of Pension Plans in a Changing Regulatory Environment Washington, D.C.: American Enterprises Institute.

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Assessing Knowledge of Retirement Behavior Congressional Budget Office 1987. Tax Policy for Pension and Retirement Savings. Washington, D.C.: U.S. Government Printing Office. Davies, J.B. 1981. Uncertain lifetime, consumption, and dissaving in retirement. Journal of Political Economy 89(3):561–576. Deaton, A. 1991. Savings and liquidity constraints. Econometrica 59(5):1221–1248. Employee Benefit Research Institute 1993. Pension coverage and participation growth: A new look at primary and supplemental plans. EBRI Issue Brief No. 144. Washington, D.C.: Employee Benefit Research Institute. Engelhardt, G.V. 1994. House Prices and Home Owner Saving Behavior. Unpublished manuscript. Dartmouth College. Engen, E.M., and W. Gale 1993. IRAs and Saving in a Stochastic Life-Cycle Model. Unpublished manuscript. University of California, Los Angeles. Engen, E.M., W.G. Gale, and J.K. Scholz 1994. Do saving incentives work? Brookings Papers on Economic Activity 1994(1):85–180. Even, W.E., and D.A. Macpherson 1994. The pension coverage of young and mature workers. Report to the U.S. Department of Labor. Pp. 85–106 in Pension Coverage Issues for the 90's. U.S. Department of Labor, Pension and Welfare Benefits Administration. Feinstein, J., and D. McFadden 1989. The dynamics of housing demand by the elderly: Wealth, cash flow and demographic effects. Pp. 55–86 in D.A. Wise, ed., The Economics of Aging. Chicago, Ill.: University of Chicago Press. Fields, G.S., and O.S. Mitchell 1984. Retirement, Pensions and Social Security. Cambridge, Mass.: MIT Press. Gale, W.G., and J.K. Scholz 1994. IRAs and household saving. American Economic Review 84(5):1233–1260. Garber, A.M., and T.E. MacCurdy 1990. Predicting nursing home utilization by high risk elderly. Pp. 173–200 in D.A. Wise, ed., Issues in the Economic of Aging. Chicago, Ill.: University of Chicago Press. Grad, S. 1994. Income of the Population 55 or Older, 1992. Washington, D.C.: U.S. Department of Health and Human Services, Social Security Administration. Green, J. 1985. The riskiness of private pensions. Pp. 357–375 in D.A. Wise, ed., Pensions, Labor, and Individual Choice. Chicago, Ill.: University of Chicago Press. Guiso, L., T. Jappelli, and D. Terlizzese 1992. Earnings uncertainty and precautionary saving. Journal of Monetary Economics 30:307–337. Gustman, A.L., and O.S. Mitchell 1992. Pensions and labor market activity: Behavior and data requirements. Pp. 39–87 in Z. Bodie and A.H. Munnell, eds., Pensions and the Economy: Sources, Uses, and Limitation of Data. Philadelphia, Pa.: Pension Research Council Publications and University or Pennsylvania Press.

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Assessing Knowledge of Retirement Behavior Gustman, A.L., O.S. Mitchell, and T.L. Steinmeier 1994. The role of pensions in the labor market. Industrial and Labor Relations Review 47(3):417–438. Gustman, A.L., and T.L. Steinmeier 1985. The 1983 Social Security reforms and labor supply adjustments of older individuals in the long run . Journal of Labor Economics 3:237–253. 1986a. A disaggregated structural analysis of retirement by race, difficulty of work and health. Review of Economics and Statistic 67(3):509–513. 1986b. A structural model. Econometrica 54(3):555–584. 1989. An analysis of pension benefit formulas, pension wealth and incentives from pensions. Pp. 53–106 in R. Ehrenberg, ed., Research in Labor Economics 10. Greenwich, Conn.: JAI Press. 1991. Changing the Social Security rules for work after 65. Industrial and Labor Relations Review 44(4):733–745. 1992. The stampede towards defined contribution pension plans: Fact or fiction? Industrial Relations 31(2):361–369. 1993. Pension portability and labor mobility: Evidence from the survey of income and program participation. Journal of Public Economics 50:299–323. 1994a. Employer-provided health insurance and retirement behavior. Industrial and Labor Relations Review 48(1):124–140. 1994b. Retirement in a Family Context: A Structural Model for Husbands and Wives. NBER Working Paper #4629. Cambridge, Mass.: National Bureau of Economic Research . 1995a. Pension Incentives and Job Mobility. Kalamazoo, Mich.: W.E. Upjohn Institute for Employment Research. 1995b. Privatizing Social Security: First Round Effects of a Generic, Voluntary, Privatized U.S. Social Security System. NBER Working Paper #5362. Cambridge, Mass.: National Bureau of Economic Research. Hall, R.E., and F.S. Mishkin 1982. The sensitivity of consumption to transitory income: Estimates from panel data on households. Econometrica 50(2):461–482. Hamermesh, D.S. 1984. Consumption during retirement: The missing link in the life cycle. Review of Economics and Statistics 66(1):1–7. Hoynes, H., and D. McFadden 1994. The Impact Demographics on Housing and Non-Housing Wealth in the United States. NBER Working Paper #4666. Cambridge, Mass.: National Bureau of Economic Research. Hubbard, R.G., J. Skinner, and S.P. Zeldes 1994a. Expanding the life-cycle model: Precautionary saving and public policy. The American Economic Review, Papers and Proceedings 84(2):174–179. 1994b. The importance of precautionary motives in explaining individual and aggregate saving. Carnegie-Rochester Conference Series On Public Policy 40(June):59–126. 1995. Precautionary saving and social insurance. Journal of Political Economy 103(2):360–399. Hurd, M. 1987. Savings of the elderly and desired bequests. American Economic Review 77(3):298–312. 1990a. The joint retirement decisions of husbands and wives. Pp. 231–254 in D.A. Wise, ed., Issues in the Economics of Aging. Chicago, Ill.: University of Chicago Press. 1990b. Research on the elderly: Economic status, retirement and consumption and saving. Journal of Economic Literature 28(2):565–637.

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Assessing Knowledge of Retirement Behavior 1993. The Effect of Labor Market Rigidities on the Labor Force Behavior of Older Workers. NBER Working Paper #4462. Cambridge, Mass.: National Bureau of Economic Research. Hurd, M., and K. McGarry 1993a. Evaluation of Subjective Probability Distributions in the HRS. NBER Working Paper #4560. Cambridge, Mass.: National Bureau of Economic Research. 1993b. The Relation Between Job Characteristics and Retirement. NBER Working Paper #4558. Cambridge, Mass.: National Bureau of Economic Research. Hurd, M., and D.A. Wise 1989. The wealth and poverty of widows: Assets before and after the husband's death. Pp. 177–200 in D. Wise, ed., The Economics of Aging. Chicago, Ill.: University of Chicago Press. Hutchens, R. 1986. Delayed payment contracts and a firm's propensity to hire older workers. Journal of Labor Economics 4(4):439–457. 1987. A test of Lazear's theory of delayed payment contract. Journal of Labor Economics 5(4)Part 2:S153–S170. Ippolito, R.A. 1983. Public policy toward private pensions. Contemporary Policy Issues, a supplement to Economic Inquiry 3:53–76. 1985a. The economic function of underfunded pension plans. The Journal of Law and Economics 28(3):611–651. 1985b. The labor contract and true economic pension liabilities. American Economic Review 75(5):1031–1043. 1986. Pensions, Economics and Public Policy. Homewood, Ill.: Dow Jones-Irwin. 1987. The implicit pension contract: Developments and new directions. Journal of Human Resources 22(3):441–467. 1990. Toward explaining earlier retirement after 1970. Industrial and Labor Relations Review 43(5):556–569. 1995. Toward explaining the growth of defined contribution pension plans. Industrial Relations 34(1):1–20. Juster, F.T., and F.P. Stafford 1991. The allocation of time: Empirical findings, behavioral models, and problems of measurement. Journal of Economic Literature 29:471–522. Karoly, L.A., and J.A. Rogowski 1994. The effects of health insurance on the decision to retire. Industrial and Labor Relations Review 48(1):103–123. Katona, G. 1965. Private Pension and Individual Saving. Ann Arbor, Mich.: Survey Research Center, University of Michigan. Kimball, M.S. 1990. Precautionary saving in the small and in the large. Econometrica 58(1):53–73. 1993. Standard risk aversion. Econometrica 61(3):589–611. Kotlikoff, L.J. 1988. Intergenerational transfers and savings. The Journal of Economic Perspectives 2(2):41–58. Kotlikoff, L.J., and A. Spivak 1981. The family as an incomplete annuities market. Journal of Political Economy 89(2):372–391. Kotlikoff, L.J., and L. Summers 1981. The role of intergenerational transfers in capital accumulation. Journal of Political Economy 89(4):706–732.

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Assessing Knowledge of Retirement Behavior Kotlikoff, L.J., and D.A. Wise 1985. Labor compensation and the structure of private pension plans: Evidence for contractual vs. spot labor markets. Pp. 55–85 in D.A. Wise, ed., Pensions, Labor, and Individual Choice. Chicago, Ill.: University of Chicago Press. 1987. The incentive effects of private pension plans. Pp. 283–336 in Z. Bodie, J.B. Shoven, and D.A. Wise, eds., Issues in Pension Economics. Chicago, Ill.: University of Chicago Press. Kruse, D.L. 1995. Pension substitution in the 1980's: Why the shift toward defined contribution pension plans? Industrial Relations 34(2):218–241. Lazear, E.P. 1979. Why is there mandatory retirement? Journal of Political Economy 87(6):1261–1284. 1983. Pensions as severance pay. Pp. 57–89 in Z. Bodie and J.B. Shoven, eds., Financial Aspects of the United States Pension System. Chicago, Ill.: University of Chicago Press. Lumsdaine, R., J. Stock, and D.A. Wise 1990. Efficient windows and labor force reduction. Journal of Public Economics 43:131–159. 1992a. Pension Plan Provisions and Retirement: Men & Women, Medicare, and Models. NBER Working Paper #4201. Cambridge, Mass.: National Bureau of Economic Research. 1992b. Three models of retirement: Computational complexity versus predictive validity. Pp 19–57 in D. Wise, ed., Topics in the Economics of Aging. Chicago, Ill.: University of Chicago Press. Lumsdaine, R., and D.A. Wise 1994. Aging and labor force participation: A review of trends and explanations. Pp. 7–41 in D. Wise, ed., Aging in the United States and Japan: Economic Trends. Chicago, Ill.: University of Chicago Press. Luzadis, R.A., and O.S. Mitchell 1991. Explaining pension dynamics. Journal of Human Resources 26(4):679–703. McGarry, K., and R.F. Schoeni 1994. Transfer Behavior: Measurement and the Redistribution of Resources Within the Family. Paper presented at Health and Retirement Survey Early Results Workshop, Survey Research Center, University of Michigan. Revised. Mitchell, O.S. 1988. Worker knowledge of pension provisions. Journal of Labor Economics 6(1):28–39. 1992. Trends in pension benefit formulas and retirement provisions. Pp. 177–216 in J.A. Turner and D.J. Beller, eds., Trends in Pensions 1992. Washington, D.C.: U.S. Department of Labor, Pension and Welfare Benefits Administration. Mitchell, O.S., and R.A. Luzadis 1988. Changes in pension incentives through time. Industrial and Labor Relation Review 42(1):100–108. Modigliani, F. 1988. The role intergenerational transfers and life cycle saving in the accumulation of wealth. The Journal of Economic Perspectives 2(2):15–40. Munnell, A.H., and F.O. Yohn 1992. What is the impact of pensions on savings? Pp. 115–139 in Z. Bodie and A.H. Munnell, eds., Pensions and the Economy: Sources, Uses, and Limitations of Data. Philadelphia, Pa.: Pension Research Council Publications and University of Pennsylvania Press. Nalebuff, B., and R.J. Zeckhauser 1985. Pensions and the retirement decision. Pp. 283–316 in D.A. Wise, ed., Pensions, Labor, and Individual Choice. Chicago, Ill.: University of Chicago Press . Parsons, D.O. 1991. The decline in private pension coverage in the United States. Economics Letters 36:419–423.

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