Working Paper: NBER ID: w29649
Authors: Isaac Ehrlich; Yong Yin
Abstract: We pursue a cross-country comparison of relative financial readiness of older households in Japan and the Republic of Korea relative to the United States. Our comparative analysis, using macro-level and harmonized longitudinal household financial data, covers the principal financial channels of old-age support: public and private pension plans, family support, and self-management of private financial portfolios. We find that while all three countries have similar public pension systems, older Americans benefit from more developed and better-funded public and private pension systems, as well as individual management of risky financial portfolios. We find that educational and health attainments of household heads and household wealth lead to a greater tendency to hold and manage risky assets. Our decomposition analysis also shows that the gap in stock ownership in Asian countries relative to the United States can be attributed to lower levels of development in financial and pension markets. However, these gaps have been shrinking more recently.
Keywords: education; financial markets development; health and wealth; household portfolio management; old-age financial preparedness and inclusion; public and private pensions
JEL Codes: G11; G12; G32; G51
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| level of development of financial systems (P34) | financial readiness of older households (D14) |
| educational attainment (I21) | management of risky assets (G11) |
| health attainments (I14) | management of risky assets (G11) |
| household wealth (D14) | management of risky assets (G11) |
| development of financial and pension markets (G23) | gap in stock ownership between Asian countries and the United States (F61) |