Rob Alessie

Habit Formation, Interdependent References and Demographic Effects in the Almost Ideal Demand System

The authors model (myopic) habit formation, interdependence of preferences among consumers, and demographic effects as taste shifters in a micro consumer demand model of the almost ideal demand variety. The model is estimated for Dutch micro data. The authors investigate the dynamic properties of the model and find that it behaves very differently from models without interdependence of preferences. The implications for micro-macro modeling are discussed. Copyright 1991 by Royal Economic Society.

OWNERSHIP OF STOCKS AND MUTUAL FUNDS: A PANEL DATA ANALYSIS

This paper analyzes the ownership dynamics of stocks and mutual funds, using representative household panel data, the Dutch CentER Savings Survey 19931998. A bivariate dynamic binary-choice model is introduced, allowing for interactions between the two types of assets. We find that unobserved heterogeneity and state dependence play a large role for both types of assets. The positive relation between ownership of one type in one period and the other type in the next period is explained by correlated unobserved heterogeneity. A negative state-dependence effect of lagged ownership of stocks on ownership of mutual funds is found, which can be explained by the costs of shifting funds across the two forms of stockholding.

Financial literacy and retirement preparation in the Netherlands

We present new evidence on financial literacy and retirement preparation in the Netherlands based on two surveys conducted before and after the onset of the financial crisis. We document that while financial knowledge did not increase from 2005 to 2010, in 2010 significantly more individuals report having thought about their retirement. Using information on financial conditions and financial knowledge of relatives, we find a positive causal effect of financial literacy on retirement preparation. Employing the panel feature of our dataset, we show that the effect of financial knowledge on retirement planning is bound to be positive.

Consumption, saving and habit formation

Abstract In this paper, we consider models of habit formation and derive closed-form solutions for consumption and saving under certainty equivalence and uncertainty. We find that consumption depends not only on permanent income and income risk, but also on past consumption. Similarly, saving depends not only on future income changes and income risk, but also on past saving.

Saving Accounts versus Stocks and Bonds in Household Portfolio Allocation

We study the structure of household portfolios of financial wealth by analyzing both the determinants of total financial wealth and the choice between risky (stocks and bonds) and riskfree assets (saving accounts). The econometric specification is a generalized trivariate Tobit model, estimated on a cross section of 3,077 households in the Netherlands in 1988. We account for endogeneity of financial wealth and for selectivity due to nonreporting. Results show that the level of financial wealth and the marginal tax rate are major determinants of the allocation between riskfree and risky assets.

Mandatory pensions and personal savings in the Netherlands

The Netherlands has a relatively generous social security system and a wide coverage of individuals by private (occupational) pension schemes. Total household savings are rather high and fairly stable, although the amount of contractual savings apears to be going up at the expense of non-contractual (‘free’) savings. Using an approach originally pioneered by Feldstein (1974) we employ microdata to investigate the displacement effect of security and pension wealth on free household savings. It turns out that the data available are too noisy to make precise statements about the displacement effects. Our results do suggest, however, that a one-for-one displacement of free savings by social security is consistent with the data. For pensions such a complete offset is less likely. This suggests that increase of coverage by private pensions is an effective way of raising savings.

Consumer Credit: Evidence from Italian Micro Data

In this paper we analyse unique data on credit applications received by the leading provider of consumer credit in Italy (Findomestic). The data set covers a five-year period (1995-1999) during which the consumer credit market rapidly expanded in Italy and a new law (the usury law) came into force that set a limit on interest rates charged to consumers. We compute behavioural changes by controlling for changes in the observable characteristics of the Findomestic clientele and argue that, under suitable identifying assumptions, these changes can be given a structural interpretation. If the usury shock is assumed to have affected credit supply but not credit demand-that is, if the usury law had a differential impact on the supply of various types of credit but a uniform impact on demand-then we can identify and estimate a demand equation. Our key finding is that demand is interest-rate elastic, particularly in the more affluent North. (JEL: D14, E21, G21) Copyright (c) 2005 by the European Economic Association.

Saving after retirement: evidence from three different surveys

Abstract We draw on three different Dutch data sets: longitudinal wealth data from the Socio-Economic Panel, consumption and income data from the Consumer Expenditure Survey, and subjective data from the CentER data -panel to study the saving behavior of the elderly. We measure savings as first differences of wealth, by subtracting consumption from income, and by using self-reported data. The analysis from these different angles can shed light on whether the elderly decumulate after retirement. We find some evidence of decumulation, but only at an advanced age. We also find that precautionary savings, bequest motives, and health are among the reasons why some elderly do not decumulate in the pattern predicted by the life-cycle model.

Life Satisfaction and Age: Dealing with Underidentification in Age - Period - Cohort Models

Recent literature typically finds a U shaped relationship between life satisfaction and age. Age profiles, however, are not identified without forcing arbitrary restrictions on the cohort and/or time profiles. In this paper we report what can be identified about the relationship between life satisfaction and age without applying such restrictions. Also, we identify the restrictions needed to conclude that life satisfaction is U shaped in age. For the case of Germany, we find that the relationship between life satisfaction and age is indeed U shaped, but only under the untestable condition that the linear time trend is negative and that the linear trend across birth cohorts is practically flat.

Saving and wealth holdings of the elderly

Abstract Using panel data for the Netherlands, we find that wealth holdings of the elderly are very unevenly distributed. Furthermore, the inequality increases with age, which indicates different rates of accumulation (or decumulation) across wealth levels. This divergence in behaviour depending on wealth holdings points to a strong bequest motive. The presence of a bequest motive is confirmed by subjective information obtained from a new and unique panel, the VSB-panel, that we exploit. For most elderly the level of assets is so low that it probably mainly serves to satisfy a precautionary motive. Subjective information in the VSB-panel shows that precautionary motives are indeed quite strong among the elderly. For the vast majority of the elderly social security and pensions are absolutely essential to maintain a decent standard of living.