Essays on Saving and Intergenerational Transfers over the Life-Cycle

This thesis contains three self-contained chapters studying the microeconomics of household savings decisions and intergenerational transfers.

Chapter 1 provides an introduction. Chapters 2 and 3 discuss savings behaviour during retirement. Chapter 4 discusses intergenerational transfers over the life-cycle.

Chapter 2 aims to understand the reasons households save, the assets they save in, and why they leave bequests. Combining panel data from the UK with variation in the tax costs of moving home due to exogenous policy changes helps to better identify the different reasons people might save. I combine this with a structural model of retirement savings which explicitly models housing, liquid assets, multiple sources of idiosyncratic risk, and house price dynamics. Aggregate house price changes have large impacts on retirees’ retained wealth and a large proportion of a generation’s good luck is passed on to their descendants. I take the current structure of disregard eligibility for programs that insure retirees as given and find that for every pound it costs the government, increasing the disregards for liquid assets provides more insurance value than increasing the disregards for houses.

Chapter 3 documents stark differences between the savings behaviour of single retirees and couples using US data. An estimated model of retirement savings that matches these differences shows precautionary savings against medical spending risk explains singles’ slow deaccumulation of wealth. For couples, who accumulate assets, this role is smaller and the interaction between this risk, the desire to leave a bequest, and a desire to insure the surviving spouse explains their savings.

In Chapter 4, I explore the motives behind lifetime intergenerational transfers Abstract 5 using a life-cycle model in which children provide informal care to their parents in exchange for  monetary transfers. Calibrating this to US data provides a lower bound on the insurance value provided by these transfers, which I show is economically significant.

Finally, Chapter 5 concludes.