Semiparametric Analysis of Wealth-Age Profiles

Given the importance of the shape of the wealth-age profile for the life cycle model, and the fact that the theory does not imply a specific functional form, we argue that a non-parametric estimation strategy is ideal. Nonparametric profiles and semiparametric partial linear models indicate that typical parametric representations can be misleading. Moreover, we find that after accounting for year effects, there are strong and clear patterns of wealth accumulation through the mid-50s, flat wealth holdings during the late 50s and mid-60s, followed by decumulation during the rest of the life cycle, which is consistent with predictions of the life cycle model.