Understanding Why High Income Households Save More Than Low Income Households

  title={Understanding Why High Income Households Save More Than Low Income Households},
  author={Mark Huggett and Gustavo Ventura},
We use a calibrated life-cycle model to evaluate why high income households save as a group a much higher fraction of income than do low income households in US cross-section data. We ̄nd that (1) age and relatively permanent earnings di®erences across households together with the structure of the US social security system are su±cient to replicate this fact, (2) without social security the model economies still produce large di®erences in saving rates across income groups and (3) purely… CONTINUE READING
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