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Bargaining models of household wealth accumulation point to a potential conflict of interest between husbands and wives. Since wives are typically younger than their husbands and have longer life expectancy, they have to finance a longer expected retirement period. Thus, it is argued that when women have greater relative bargaining power, households will accumulate higher levels of wealth. However, in this paper, exactly the opposite pattern is reported for New Zealand. To explain this contradiction of the pattern reported in the literature, we construct a consumption smoothing model of saving for retirement. The results suggest that in this setting it may be rational for women with greater bargaining power to favour greater current consumption rather than wealth accumulation. These results indicate the importance of defining the policy context precisely when considering the implications of household bargaining models.
The authors are grateful to Sholeh Maani, Iris Claus and Bronwyn Croxson for comments on an earlier draft.
The authors are grateful to Statistics New Zealand for their collaboration in providing access to the data, and in particular to Tanya Randall, Jason O’Sullivan and Peter O’Brien. Access to the data used in this study was provided by Statistics New Zealand in a secure environment designed to give effect to the confidentiality provisions of the Statistics Act, 1975. The results in this study and any errors contained therein are those of the authors, not Statistics New Zealand.
The views, opinions, findings, and conclusions or recommendations expressed in this Working Paper are strictly those of the authors.. They do not necessarily reflect the views of the New Zealand Treasury. The New Zealand Treasury takes no responsibility for any errors or omissions in, or for the correctness of, the information contained in this Working Paper. The paper is presented not as policy, but to inform and stimulate wider debate.
Table of Contents
- 1 Introduction
- 2 Previous Evidence on Marital Bargaining and Household Savings
- 3 Data and Estimation Issues
- 4 Econometric Results
- 5 The New Zealand Pension System
- 6 A Model of Prescribed Saving Rates for Retirement
- 7 Results of the Retirement Savings Model
- 8 Conclusions