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Individual Preferences and Disparities in Personal Wealth

By Luc Arrondel, André Masson and Daniel Verger

Abstract

Do the individual preference indicators we developed have any significant effects on net or gross financial assets in keeping with the predictions of microeconomic savings models? The empirical analysis of the 1998 INSEE Patrimoine survey on personal wealth comes to a positive answer to this question, but especially in the case of the scores: these composite indicators have much greater and more consistent explanatory power than that of the other preference measures considered. The explanatory gain obtained with the preference scores may seem modest due to the extremely high concentration of wealth. Unobserved heterogeneity is not greatly reduced. Yet despite all this, the quantitative effects of these subjective variables are far from negligible, especially as regards the time preference: between individuals at either end of the scale i.e. between the shortest sighted and the farthest sighted in the sample the estimated deviations in personal wealth range from 1 to 10.Risk Aversion, Time Preference, Life Cycle Models, Wealth Inequality

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