UMD Theses and Dissertations
Permanent URI for this collectionhttp://hdl.handle.net/1903/3
New submissions to the thesis/dissertation collections are added automatically as they are received from the Graduate School. Currently, the Graduate School deposits all theses and dissertations from a given semester after the official graduation date. This means that there may be up to a 4 month delay in the appearance of a given thesis/dissertation in DRUM.
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Item Essays on the Determinants of Pension Savings and Retirement Management Decisions(2011) Lara-Ibarra, Gabriel de Atocha; Kearney, Melissa S; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)In recent years, governments have become increasingly concerned about the low levels of households wealth accumulation upon retirement, and the capacity of individuals to keep the standard of living they had during their working lives. Among the reasons behind these concerns are the high relative poverty rates among elderly households, the low replacement rates provided by compulsory pension systems, and the higher responsibility placed on individuals to fund their retirement due to changes in pension systems and the increased complexity of financial instruments. Government officials in various countries have developed a series of policies that aim at encouraging retirement savings among the population. The evaluation of the effectiveness of such policies has been a continuous objective of economists. This dissertation contributes to the public economics literature in accomplishing this objective via two cases whose analysis will hopefully inform policy makers and help better design policies geared towards improving individuals' retirement wealth accumulation. In chapter 2, I investigate the effect of the introduction of tax free retirement accounts on the savings behavior of Mexican households. This chapter contributes empirical evidence to the debate about whether preferential tax treatment is an effective policy tool to encourage household savings. The empirical strategy is a difference-in-difference approach that utilizes an arguably exogenous change in access to tax free accounts for a well-defined set of workers. The data provide evidence of heterogeneous effects across demographic subgroups and across quantiles of the savings distribution that accord with predictions of a standard model of savings behavior. In particular, the data show an increase in the savings rate of treated workers in the year following the introduction of the accounts. The effect is driven by prime age workers and by high income workers. Among prime age workers, the lower savers experience the largest effects of the policy change. I perform multiple robustness checks on these findings, including estimating propensity score matching models and tests for potential confounding factors such as changes in retirement accounts' returns or fees, or changes in workers' income. In chapter 3, I analyze whether information framing related to the performance of Pension Funds Administrators affects the retirement management decisions of Mexican workers. I conduct a survey to collect information on recommendations for Fund Administrator made by Mexican workers when faced with randomly framed scenarios. The scenarios feature framing based on choice avoidance and framing exploiting loss aversion. I find evidence that reducing the number of possible choices increases the probability that individuals choose a Fund Administrator with a higher net return or with lower fees. A loss aversion framing increases the probability that individuals choose a Fund Administrator with a higher net returns. Finally, I find evidence that higher levels of financial literacy decrease the effects of framing on Fund Administrator choice.Item PRECAUTIONARY SAVINGS IN SMALL OPEN ECONOMIES(2010) Roitman, Agustin S.; Vegh, Carlos A; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)Emerging markets are more volatile and face different types of shocks, in size and nature, compared to their developed counterparts. Accurate identification of the stochastic properties of shocks is difficult. We show evidence suggesting that uncertainty about the underlying stochastic process is present in commodity prices. In addition, we build a dynamic stochastic general equilibrium model with informational frictions, which explicitly considers uncertainty about the nature of shocks. When formulating expectations, the economy assigns some probability to the shocks being temporary even if they are actually permanent. Parameter instability in the stochastic process implies that optimal saving levels (debt holdings) should be higher (lower) compared to a process with fixed parameters. Imperfect information about the nature of shocks matters when commodity GDP shares are high. Thus, economic policies based on misperception of the underlying regime can lead to substantial over/under saving with important associated costs. Later, I introduce the first example of a particular class of preferences characterized by a negative third derivative and a constant and invariant coefficient of relative prudence in the sense of Kimball (1990). This particular feature enables us to isolate the effect of risk aversion on precautionary savings. Furthermore, I use this particular class of preferences to assess the effects of volatility, risk aversion, interest rates and intertemporal distortions on precautionary savings in finite and infinite horizon models of a small open economy. The effects of risk aversion, intertemporal distortions and interest rates on average assets holdings are qualitatively identical as the ones observed for CES preferences. Using an infinite horizon model I can evaluate the effects of persistence and volatility of shocks on precautionary savings and verify that these are qualitatively identical to the ones observed with CES preferences.Item Mortgage Contracts and the Definitions of and Demand for Housing Wealth(2005-05-31) Nichols, Joseph B; Shea, John; Rust, John; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)Owner-occupied housing plays a central role in the portfolios of many households. Recent work has explored the connection between a household's position in home equity and the demand for risky assets in the financial portfolio. This dissertation examines the role of the mortgage contract on the definition of and demand for housing wealth. This first chapter develops a detailed partial equilibrium model of housing wealth's role over the life-cycle to explore (1) housing's dual role as a consumption and investment good; (2) the significance of the mortgage contract being in nominal and not real terms; and (3) the tax benefits associated with owner-occupied housing. The household's dynamic stochastic programming problem is solved using parallel processing. The results show that the ``over-investment'' in housing is not just a function of consumption demand but also can be driven by the benefits inherent in the mortgage contract. It also shows that the nominal mortgage contract results in the non-neutrality of perfectly expected inflation. Finally, the paper documents the effect of preferential tax treatment on housing demand. This paper develops an alternative measure of the return on housing that incorporates the consumption stream and the required mortgage payments associated with owner-occupied housing. This measure is then used to demonstrate how the total return on housing varies with anticipated holding length, terms of the mortgage contract, and borrower income level. Data from the Panel Study of Income Dynamics and the Survey of Consumer Fiance are used to explore the empirical relationship between property, mortgage, and borrower characteristics and the total return on housing, the probability of negative total return, and the demand for risky assets.