information only on flows, which makes it impossible to compute an estimate of
the stock dimension of savings. Data also on stocks are available only for some
variables, namely checking and saving accounts and stocks and bonds. For these
variables, the information on flows is somewhat scarce due to many invalid
nonresponses or refusals to respond. Since the problem of missing data is
particularly serious for the variables on flows, whenever advisable we have
computed savings as first differences in the stocks. Thus, for each year we have
determined mean holdings by year of birth of the household head and then we
have computed the annualized difference in the mean stock for each cohort.
Because of the severity of the problem of missing financial saving observations, the
analysis based on the first measure of saving uses a sample of only 46,051
households. Another problem concerns the unavailability of important saving
components, such as those related to cash, capital gains, consumer loans,
mortgages, and real asset holdings. For all these reasons, th e saving measure
obtained by adding up individual components is expected to differ substantially
from the residual measure. An important issue is also the unavailability of data on
employers’ mandatory and voluntary contributions to funded and unfunded
pension schemes. The second measure of savings is determined by subtracting
household total consumption, which includes expenditure on durable and
nondurable goods and on services, from total disposable income. Total disposable
income includes labor, business, asset, and transfer income and is computed by
subtracting the total amount of personal taxes and social security contributions
from household total gross yearly income as reported at the time of the last
interview. Apart from total income, all the other yearly income and saving
variables are determined by taking household-level averages when the respondent
reports different annual values at different interviews.
The analysis that follows focuses, first, on cross-sectional saving patterns and, then,
on cohort behavior to identify life-cycle changes. For the analysis, all the data are
weighted by the available household weights to represent the universe of US
Cross-Sectional Profiles of Household Saving
In the first part of this section we focus on the individual components of household
saving and classify them into two groups:
(a) Discretionary savings, which are defined as changes in wealth that are under the
control of the household and concern both the absolute and relative
composition of the asset portfolios.
320 Chapter 8 Household Saving Behavior and Pension Policies in the United States

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