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PORTFOLIO ALLOCATION IN THE FACE OF A MEANS‐TESTED PUBLIC PENSION
Author(s) -
COBBCLARK DEBORAH A.,
HILDEBRAND VINCENT A.
Publication year - 2011
Publication title -
review of income and wealth
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.024
H-Index - 57
eISSN - 1475-4991
pISSN - 0034-6586
DOI - 10.1111/j.1475-4991.2011.00437.x
Subject(s) - incentive , asset (computer security) , pension , portfolio , asset allocation , economics , sample (material) , health and retirement study , actuarial science , pension plan , labour economics , demographic economics , finance , microeconomics , gerontology , medicine , chemistry , computer security , chromatography , computer science
We investigate whether households adjust their asset portfolios just prior to retirement in ways that are consistent with maximizing eligibility for a means‐tested public pension. We utilize detailed micro data for a nationally‐representative sample of Australian households to estimate a system of asset equations which are constrained to add up to net worth. Our results provide little evidence that healthy households or couples are responding to the incentives embedded in the means tests determining pension eligibility by reallocating assets. While there are some differences in asset portfolios associated with having an income near the income threshold, being of pensionable age, and being in poor health, these differences are often only marginally significant and are not clearly consistent with the incentives inherent in the Australian age pension eligibility rules. Any behavioral response to the incentives inherent in the age‐pension means test appears to be predominately concentrated among single pensioners who are in poor health.