Econometric flexibility in microsimulation: an age-centred regression approach

This paper describes a strategy for estimating predictive equations that has been shown to work well in microsimulation modelling. The technique, referred to here as ?age-centred regression,? is particularly useful when the available data set for estimating a model equation is limited and the marginal effect of one or more explanatory variables might be expected to vary systematically by age. The examples used here to describe how age-centring works are taken from the labour supply equations in the Congressional Budget Office Long-Term (CBOLT) dynamic microsimulation model. By switching from a traditional single-equation approach to age-centred regression, we show that marginal effects of independent variables can vary significantly across age groups. The comparison also reveals that improvements in mean predictions by age can be achieved with little if any loss in statistical precision of coefficient estimates.age-centred regression; heterogeneity; spline; kernel

Wealth Inequality and Retirement Preparedness: A Cross-Cohort Perspective

High and rising US wealth inequality underscores the need to revisit a perennial concern in policy circles: retirement preparedness. Our cross-cohort approach to studying retirement adequacy is based on relative wealth measures, meaning how the wealth distribution of one cohort compares to the cohorts ahead of them at the same age. We introduce relative rank distributions that show where individuals are in terms of the cohorts ahead of them at the same age, and percentile point comparisons that show how wealth levels at various percentiles vary across cohorts by age. We find that early Baby Boomer’s wealth is generally on par with or above 1930s cohort wealth at age 60. There is, however, evidence of relative wealth declines in the bottom of the wealth distribution for mid-late Boomers and Gen-Xers relative to earlier cohorts at younger ages, which is consistent with rising wealth inequality across and within generations. Social security is an important offset to relative wealth declines at the bottom of the wealth distribution, but those benefits are not expected to be fully payable for the youngest cohorts

Qualified Retirement Plans: Analysis of Distribution and Rollover Activity

One potential downside when employees have the freedom to manage their own retirement accumulations is “leakage” prior to the end of their working careers, which is proxied here using age 60. Leakage occurs when employees take withdrawals prior to retirement, when they cash out distributions at job separation, or when they fail to pay back loans taken out against their accounts. Although leakage has the potential to undermine a participant-driven retirement system, trend analysis shows that aggregate pre-retirement leakage is modest and trending down relative to assets, and stable as a share of gross contributions. The probability of receiving a distribution and the fraction of gross distributions cashed out are roughly equal across income groups, but the portion cashed out represents a higher percentage of income for the lower-income groups

Estimating Top Income and Wealth Shares: Sensitivity to Data and Methods

Administrative income tax data indicate that U.S. top income and wealth shares are both substantial and larger than shares observed in household surveys. However, these estimates are sensitive to the unit of analysis, the income concept measured in tax records, and, in the case of wealth, to assumptions about the correlation between income and wealth. We constrain a household survey—the Survey of Consumer Finances—to be conceptually comparable to tax records and are able to reconcile the much of the difference between the survey and administrative estimates. Wealth estimates from administrative income tax data are sensitive to model parameters

Social Security Wealth, Inequality, and Life-cycle Saving: An Update

Social Security wealth (SSW) is the present value of future benefits an individual will receive less the present value of future taxes they will pay. When an individual enters the labor force, they generally face a lifetime of taxes to pay before they will receive any benefits and, thus, their initial SSW is generally low or negative. As an individual works and pays into the system their SSW grows and generally peaks somewhere around typical Social Security benefit claiming ages. The accrual of SSW over the working life is most important for lower income workers because the progressive Social Security benefit formula means that taxes paid while working are associated with proportionally higher benefits in retirement. We estimate SSW for individuals in the Survey of Consumer Finances (SCF) for 1995 through 2019 using detailed labor force history and expectations modules. We use a pseudo-panel approach to empirically demonstrate life-cycle patterns of SSW accumulation and drawdown. We also show that including SSW in a comprehensive wealth measure generally reduces estimated levels of U.S. wealth inequality, but does not reverse the upward trend in top wealth shares.U.S. Social Security Administration, RDR18000002-02, UM20-16http://deepblue.lib.umich.edu/bitstream/2027.42/168228/1/wp416.pdfDescription of wp416.pdf : working paperSEL

The Realities of Managing Complex Space Missions like the James Webb Space Telescope

An overview of the James Webb Space Telescope (JWST) project and its status are presented. The JWST is a deployable infrared telescope with a 6.5 meter diameter segmented, adjustable primary mirror. It has a cryogenic temperature telescope and instruments suited for infrared performance. It will be launched in 2013 on an European Space Agency-supplied Ariane 5 rocket 20 Sun-Earth L2 for a 5-year mission. Compared to other telescopes the JWST: has a 2.7 time longer diameter and 2.7 time longer wavelength capability than the Hubble Space Telescope (HST), 38 times increased sensitivity at K band and 8 times increased sensitivity at H band than the HST NICMOS; and, 8-24 times better angular resolution than the Spitzer. An instrument overview and integration and test flow overview are provided. The JWST project management approach, including organizational chart, program phases, technology status, and project critical path summary, are included. Additionally, project management tools and guidelines are are outlined

Understanding the Postwar Decline in U.S. Saving: A Cohort Analysis

Since 1980, the U.S. net national saving rate has averaged less than half the rate observed in the 1950s and 60s. This paper develops a unique cohort data set to study the decline in U.S. national saving. It decomposes postwar changes in U.S. saving into those due to changes in cohort-specific consumption propensities, those due to changes in the intergenerational distribution of resources, those due to changes in government spending on goods and services, and those due to changes in demographics. Our findings are striking. The decline in U.S. saving can be traced to two factors: The redistribution of resources from young and unborn generations with low or zero propensities to consume toward older generations with high consumption propensities, and a significant increase in the consumption propensities of older Americans. Most of the redistribution to the elderly reflects the growth in Social Security, Medicare, and Medicaid benefits. The increase in the elderly's consumption propensities may also reflect government policy, namely the fact that Social Security, Medicare, and Medicaid benefits are paid in the form of annuities and that, in the case of Medicare and Medicaid, the annuities are in-kind and must, therefore, be consumed.

The Annuitization of Americans' Resources: A Cohort Analysis

This paper constructs a unique cohort data set to study the changes since 1960 in the share of Americans' resources that are annuitized. Understanding these changes is important because the larger this share, the more cohorts are likely to consume and the less they are likely to bequeath. Hence, the degree of annuitization affects national saving as well as the transmission of inequality over time. Our findings are striking. Although the annuitized share of resources of younger Americans declined slightly between 1960 and 1990, it increased dramatically for older Americans. It doubled for older men and quadrupled for older women. Since the elderly have much higher mortality probabilities than do the young, their degree of annuitization is much more important for aggregate bequests and saving. According to our estimates, aggregate U.S. bequests would now be 66 percent larger had the post-1960 increase in annuitization not occurred. In addition, U.S. national saving would likely be substantially larger than is currently the case.