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4  Econometric Results

Table 3 contains the results of the econometric model of the net worth of couples in the 45-55 year old cohort in New Zealand. The key result is that, conditional on a set of variables for the characteristics of the couple that are assumed to affect total lifetime resources, in couples where the women has more power, the net worth is lower. Specifically, a one standard deviation increase in the women’s bargaining power (using POWER1 as the measure) would reduce the median net worth of the couple by about NZ$9,600. The effect is slightly smaller, but still statistically significant when the power index that includes income differences is used. Thus, we find exactly the opposite result to that obtained by Lundberg and Ward-Batts (2000b) using a similar model with a similar sample, but a different economic environment.

Table 3 – Collective Models of Household Net Worth
  Excluding Income Differences Including Income Differences
Power Index -8.849 *** (3.344)      
Power Index (w/ income difference)       -6.129 *** (2.341)
Age of couple (combined) 5.291 *** (0.392) 5.403 *** (0.293)
Couple is married 30.059 *** (10.412) 24.690 *** (8.057)
Both are migrants -101.127 *** (14.567) -82.973 *** (10.729)
One person is a migrant -89.454 *** (10.472) -91.547 *** (7.612)
Secondary school years (combined) 14.396 *** (2.127) 12.169 *** (1.561)
Post-secondary school years 2.610 ** (1.167) 1.485 * (0.858)
Did either inherit money? 32.843 *** (8.918) 20.943 *** (6.640)
Amount inherited ($’000) 0.459 *** (0.051) 0.486 *** (0.037)
Main income source for the household            
  Self-employment 160.830 *** (9.107) 170.012 *** (6.726)
  Investment 434.733 *** (27.152) 458.898 *** (18.953)
  Not specified 56.458 ** (26.935) 923.916 *** (23.339)
Total household income  ($’000) 3.081 *** (0.113) 3.142 *** (0.084)
Total income squared 0.000 *** (0.000) 0.000 *** (0.000)
Pseudo-R2   0.237     0.236  
No. of Observations   923     877  

Note: The dependent variable is the net worth of the couple in NZ$’000. Models also include a constant and control variables for ethnicity, location, same-sex couples, location, expectations of inheritance and dummy variables for whether the main income is from government benefits or from other regular sources. Both the event of inheritance and the amount are included as the amount is recorded in the survey only if it exceeded $10,000.

Coefficients and standard errors (in parentheses) are based on weighted estimates;

* statistically significant at 10%; ** statistically significant at 5%; *** statistically significant at 1%.

A range of sensitivity analyses are reported in Appendix Table 1. These vary the estimation method (OLS rather than LAD), the sample, and whether the control variables are measured for each individual in the couple, or as an average of the characteristics of the two persons. The coefficient estimates range from -2.5 to -11.4 for the first power index, and from -4.5 to -24.6 for the second power index. The standard errors are also somewhat variable. However, the overall impression is to support the result from Table 3 of a negative and statistically significant effect of increases in women’s bargaining power on the net worth of pre-retirement couples.

Additional sensitivity analyses in Appendix Table 2 use the individual proxies for bargaining power, rather than the indexes created from the factor analysis. None of the individual proxies for bargaining power attract positive and statistically significant coefficients, which is once again contrary to the finding of Lundberg and Ward-Batts (2000a&b). Usually, amongst the four individual proxies, it is the difference in the years of secondary education that has the largest effect on differences in net worth.

In an effort to explain why the results for New Zealand are diametrically opposed to those found in the United States by Lundberg and Ward-Batts (2000b), we will argue that the policy context plays a critical role. Specifically, New Zealand's universal public pension scheme plays a major role in retirement savings decisions. This scheme is explained in the next section.

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