Do the rich still save more if we use better data?


Do the rich still save more if we use better data?

Research Seminar

Tuesday 21 May 2019, 16:30 — 17:30

Presented by  Joachim Winter  (University of Munich)

Venue: Office for National Statistics, 1 Drummond Gate, London, SW1V 2QQ

A long-standing question in empirical economics is whether more affluent households save a larger fraction of current income than poorer households. Much of the literature has used IV approaches to deal with any measurement error or transitory fluctuations in income, but it is challenging to find valid instruments to deal both with transitory income shocks and the systematic under-reporting of expenditure and misreporting of income that (we think) pervades household surveys. We use data from an experimental design that collected information on income, spending, and “net saving”, and then prompted respondents to make adjustments if these were not in balance. Those households who do, after prompting, report consistent data on their household finances have much lower saving rates, below 5% for low income households, and rising slowly to 25% for the richest. On the other hand, the majority of households do not report consistent data on their household finances even after a prompt. Our results highlight the potential for measurement error or transitory shocks to income and spending to distort seriously estimates of the saving function.

Joachim Winter is Professor of Economics at the University of Munich (LMU). He holds graduate degrees in economics from the University of Augsburg and the London School of Economics and a doctoral degree from the University of Mannheim. He served as the deputy director of the Mannheim Research Institute for the Economics of Aging (MEA) before joining the University of Munich. His research interests include individual decision-making (in particular saving, portfolio and insurance choices) and the design and analysis of household surveys.

As a research professor of the Deutsche Bundesbank, Frankfurt, he is involved in the design and data analysis of the German component of the Household Finance and Consumption Survey (HFCS). He has also worked on the design of subjective expectations questions for the Survey of Health, Aging, and Retirement in Europe (SHARE), and he designed internet surveys on health insurance demand and financial literacy in the United States.

Joachim Winter

Video of presentation