Joseph P. Lupton

Marriage, Assets, and Savings

This paper explores the relationship between household type and asset accumulation. Households distinguish principally along standard demographic lines -whether they marry, divorce, seperate or become widowed. To accomplish this goal, we rely on two household surveys with high quality wealth modules.

The Decline in Household Saving and the Wealth Effect

Using a unique set of household level panel data, we estimate the effect of capital gains on saving by asset type, controlling for observable and unobservable household specific fixed effects. The results suggest that the decline in the personal saving rate since 1984 is largely due to the significant capital gains in corporate equities experienced over this period. Over five-year periods, the effect of capital gains in corporate equities on saving is substantially larger than the effect of capital gains in housing or other assets. Failure to differentiate wealth affects across asset types results in a significant understatement or overstatement of the size of their impact, depending on the asset.

To Leave or Not to Leave: The Distribution of Bequest Motives

In this paper, we examine the effect of observed and unobserved heterogeneity in the desire to die with positive net worth. Using a structural life-cycle model nested in a switching regression with unknown sample separation, we find that roughly three-fourths of the elderly single population has a bequest motive that may or may not have an appreciable effect on spending depending on the level of resources. Both the presence and the magnitude of the bequest motive are statistically and economically significant. On average, households with a bequest motive spend about 25 percent less on consumption expenditures. We conclude that, among the elderly single households in our sample, about four-fifths of their net wealth will be bequeathed and approximately half of this is due to a bequest motive.

Wealth Dynamics in the 1980s and 1990s: Sweden and the United States

Given differences in public saving programs between Sweden and the United States, an examination of household private wealth accumulation in these two countries can be enlightening. In this paper we examine wealth inequality and mobility in Sweden and the United States over the past decade. We show that wealth inequality has been significantly greater in the United States than in Sweden and, while remaining relatively constant since the mid-1980s in Sweden, has increased in the United States. In addition to less inequality and a higher median wealth, we also show that wealth quintile mobility in the 1990s has been 25.7 percent higher in Sweden, as measured by Shorrocks’ index. Noting the role of various demographic components in shaping the patterns of wealth mobility as well as the importance of the initial wealth distribution, we utilize a matching algorithm that controls for these differences. Matching on the initial wealth distribution alone accounts for most of the mobility difference between the two countries and yields a Shorrocks’ index in the United States 11.1 percent less than that in Sweden. Adjusting for the large degree of imputation in the Swedish data, the U.S. index is only 3.4 percent to 6.1 percent less than that of Sweden. Along with exploring the role of racial composition differences, we conclude that demographic vari- ation between Sweden and the United States plays very little role in explaining wealth mobility beyond that explained by the initial wealth distribution. Despite the higher quintile mobility in Sweden, dollar mobility is still higher in the United States.

The Household Spending Response to the 2003 Tax Cut: Evidence from Survey Data

The Jobs and Growth Tax Relief and Reconciliation Act of 2003 has been described as textbook fiscal stimulus. Using household survey data on the self-reported qualitative response to the tax cuts, we estimate that the boost to aggregate personal consumption expenditures from the child credit rebate and the reduction in withholdings raised the average level of real GDP in the second half of 2003 by 0.2 percent and by 0.3 percent in the first half of 2004. We also show that households in the survey were well aware of their tax cuts and tended to spend equally out of the child credit rebate and the reduced withholdings, a result that is contrary to the conventional wisdom.

Ensuring Time-Series Consistency in Estimates of Income and Wealth

In the past decade, researchers have made substantial improvements to survey questions that allow them to obtain more accurate information from survey respondents about income and wealth. However, changing survey questions - even for the better - can create problems. For example, if we ask a respondent about his wealth holdings in 1992 and ask him again in 1994 but use a different and improved set of questions, we cannot be sure that changes in his wealth are real because part of the observed change can be due to the fact that we simply got better information the second time we asked. Thus, the cost of improved questions can be inconsistency in the data over time. We refer to this problem as time-series inconsistency. In this paper, we describe work that addresses this problem in the Health and Retirement Study (HRS) using data on income from financial assets. We describe a method of computation that allows us to resolve times series inconsistencies.

WealthDynamicsin the 1980s and 1990s: Sweden and the United States

Given differences in public saving programs between Sweden and the United States, an examination of household private wealth accumulation in these two countries can be enlightening. In this paper we examine wealth inequality and mobility in Sweden and the United States over the past decade. We show that wealth inequality has been significantly greater in the United States than in Sweden and, while remaining relatively constant since the mid-1980s in Sweden, has increased in the United States. In addition to less inequality and a higher median wealth, we also show that wealth quintile mobility in the 1990s has been 25.7 percent higher in Sweden, as measured by Shorrocks’ index. Noting the role of various demographic components in shaping the patterns of wealth mobility as well as the importance of the initial wealth distribution, we utilize a matching algorithm that controls for these differences. Matching on the initial wealth distribution alone accounts for most of the mobility difference between the two countries and yields a Shorrocks’ index in the United States 11.1 percent less than that in Sweden. Adjusting for the large degree of imputation in the Swedish data, the U.S. index is only 3.4 percent to 6.1 percent less than that of Sweden. Along with exploring the role of racial composition differences, we conclude that demographic variation between Sweden and the United States plays very little role in explaining wealth mobility beyond that explained by the initial wealth distribution. Despite the higher quintile mobility in Sweden, dollar mobility is still higher in the United States.