Intergenerational transmission of saving propensity

Meet the researchers: Philippe D'astous, Pierre-Carl Michaud & Gaëlle Simard-Duplain
Posted on May 12, 2020

Meet the winners of the TFI long-term research grant: Philippe d'Astous, Pierre-Carl Michaud and Gaëlle Simard-Duplain from HEC Montreal.

They will study how parental saving behaviours impact children’s saving in adulthood, and the intergenerational transmission of economic (dis)advantage. Who are the researchers and what is the main motto of this project and its expected impact?

In this project, we will investigate how parental saving decisions impact children’s decisions to save in adulthood. To do so, we will exploit reforms that increased the contribution limits to retirement and post-secondary education savings programs in Canada. We will first estimate the impact of these policy changes on the saving behaviour of parents, and then measure the effect of changes in parental saving on children’s financial decisions. Our analysis is made possible by using the Intergenerational Income Database (IID), a Canadian administrative dataset which links the personal income tax records of tax filers born between 1963 and 1985 to their parents’ tax records.

Our results will measure the role that parents’ saving for retirement and their children’s education plays in improving children’s economic outcomes and their ability to save for their own retirement, and in turn for their children’s education. There is limited scientific evidence on the potential for policy to improve individuals’ financial well-being by intervening with their parents. We will contribute to fill in this gap by documenting the transmission of saving behavior from parents to children, analysing large reforms to some of the most accessible savings programs to the middle-class in Canada.

Our results should provide actionable insights to ensure the intergenerational equity and sustainability of pension programs and the potential economic mobility from saving for college education. Our research will also inform businesses to potentially improve services to their clients by analysing information on their parents’ financial history.

“We will document the transmission of saving behavior from parents to children, analysing large reforms to savings programs in Canada.”

What motivated you to work together with the Think Forward Initiative?

In recent years, we have been well aware of the participation of the TFI in the network of household finance researchers, notably through their implication in several CEPR academic events. The TFI call for research projects was released just as we were talking about studying the intergenerational transmission of saving behaviour, hence the timing for collaboration was perfect. We are motivated by a shared desire to improve individuals’ and households’ ability to make decisions that contribute to their financial well-being. In line with the TFI’s philosophy, we believe that this ambitious objective calls for a multidisciplinary approach, that reaches beyond the realm of academia. In particular, we recognize that the research process benefits from the feedback of policy makers and industry partners. Members of the academic, public and private sectors have much to gain by exchanging ideas and challenging each other, and we view our work with the TFI as an opportunity to do just that.

How do you expect your research results to contribute to people’s financial well-being?

The results of our research will provide useful insights for policy makers and industry organisations, by analysing two domains of saving that concern most families: retirement and education. Our study will quantify the extent to which policy reforms aimed at increasing retirement savings affect the propensity to save of the next generation of workers. This speaks directly to the sustainability of public and private pension systems, as governments worldwide are under pressure to stimulate saving among their aging populations. It is also a crucial aspect of intergenerational equity.

Our research will also document how savings for post-secondary education can be transmitted across generations. While education can improve financial well-being, its cost can also lead to substantial indebtedness. Parents can play an important role in that context, if they’re able to save early and transmit good saving behaviours to their children.

Finally, our results will have implications for businesses that design and sell investment products. Indeed, similarities in the saving behaviour of parents and children can be leveraged to help children define and achieve their financial objectives, and to offer them better suited saving products.

The research team

Philippe d’Astous is an assistant professor in the finance department at HEC Montréal. He holds a Ph.D. in risk management from Georgia State University. His research focuses on the decision making of individuals regarding their debt, savings and consumption. He has varied experience in empirical work using individual level microdata, both administrative and survey-based.

Pierre-Carl Michaud is a full professor in the applied economics department at HEC Montréal. He holds the Industrial Alliance Research Chair on the Economics of Demographic Change, and is director of the Retirement and Savings Institute at HEC Montréal. His research aims to understand life-cycle behaviour along a number of dimensions including savings, insurance and pensions, as well as health investments and the economic consequences of demographic change. Professor Michaud has received funding for his work from numerous public and private organizations in Canada, the US and Europe, and his research has been published in top journals in economics, demography and public health. Since 2017 he has been a NBER research associate in the Aging program. In 2018, he received the Marcel-Dagenais Award from the Société canadienne de science économique (SCSE) for his research. He holds a Ph.D. in economics from Tilburg University.

Gaëlle Simard-Duplain is a postdoctoral researcher at the Research Chair in Intergenerational Economics, HEC Montréal. She holds a Ph.D. in economics from the University of British Columbia. Her research focuses on the intersection between family and economic outcomes. For her doctoral thesis, she studied the role of education in the intergenerational transmission of income, using administrative records similar in structure and content to those which will be used for this project. She has also investigated the evolution of wealth inequality in Canada, and the role of pensions in that context. She has extensive experience in working with administrative data, in particular within the Statistics Canada research data ecosystem.