Private Wealth Over the Life Cycle: A Meeting Between Microsimulation and Structural Approaches

This paper embeds a structural model of private wealth accumulation over the life cycle within a dynamic microsimulation model designed for long-run projections of pensions. In such an environment, the optimal savings path results from consumption smoothing and bequests motives, on top of the mortality risk. Preferences are estimated based on a longitudinal wealth survey through a method of simulated moments. Simulations issued from these estimations replicate quite well a private wealth that is more concentrated than labor income. They enable us to compute “augmented” standards of living including capital income, hence to quantify both the countervailing role played by private wealth to earnings dropout after retirement and the impact of the mortality risk in this regard.