The Displacement Effect of Compulsory Pension Savings on Private Savings
We study the displacement effect of mandatory occupational pension saving on private household wealth in the Netherlands, separately for wage-employed and self-employed. We use rich administrative data on (pension) wealth and income and apply a range of identification strategies, from IV regressions to propensity score matching and difference-in-differences analyses, to determine the displacement effects.To the best of our knowledge, for the first time, we merge pension funds balance sheet data to the micro data of their members.
We set up a quasi-natural experiment, based on the differential impact of the financial crisis on the separate pension funds in the Netherlands, and we find that those whose pension fund did not need to apply a recovery plan accumulated about 3,500 euro less
household wealth over de period 2007-2010. Our preferred regression analyses on couples show a displacement effect of -33% for wage-employed and a higher one of -61% for self-employed. Selfemployed are arguably more aware of their pension accrual, or lack thereof, because they are responsible for the payment of their pension premiums. Also, the self employed are on average less risk-averse than wage-employed, and can thus be expected to hold less precautionary savings.