The limits for retirement income are 30000 and 52000

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The limits for investment income are $75,000, $40,000 and $50,000 in 1980, 1990 and 2000 respectively. The limits for retirement income are $30,000 and $52,000 in 1990 and 2000 respectively. (The 1980 Census did not separate retirement income from other sources of income.) The percentage of topcoded observations is very low: 0.47% for investment income and 0.22% for retirement income. Of course, using as a dependent variable 4
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A limitation of using the amount of investment income, rather than amount invested, is that the level of investment need not be monotonically related to the level of income from investments. An individual with $10,000 in bonds may well report more investment income than a household with $30,000 in equity. This would make it di¢ cult to use the data for structural estimates of investment levels (such as estimates of participation costs). In this work, we focus primarily on the decision to participate in ±nancial markets, for which we de±ne a dummy variable equal to one if the household reports any positive investment income. Approximately 22% of respondents do so, which is close to 21.3% of families that report holding equity in the 2001 Survey of Consumer Finances (Bucks, Kennickell, and Moore, 2006), but lower than the 33% of households reporting any investment income in the 2001 SCF. The data appendix compares the data from the SCF and the Census in greater detail. We report results for both the level of investment income (in 2000 dollars), and place of that individual in the overall distribution of investment income. The latter term we measure by the household°s percentile rank in the distribution of investment income divided by total income. The limitations of the data on household wealth are counterbalanced by the size of the dataset: a sample of 14 million observations allows for non-parametric analysis along multiple dimensions, as well as the use of innovative identi±cation strategies to measure causal e/ects. 2.2 Patterns of Participation Correlates of participation in ±nancial markets are well understood. Campbell (2006) provides a careful, recent review of this literature. Previous work has demonstrated that participation is, not surprisingly, increasing in income, as well as education (Bertaut and Starr-McCluer, 2001, among others), measured ±nancial literacy (Lusardi and Mitchell, 2007, and Rooij, Lusardi, and Alessie, 2007), social connections (Hong, Kubik, and Stein, 2004), and trust (Guiso, Sapienza, and Zingales, 2008), and experience with the stock market (Malmendier and Nagel, 2007). Tortorice (2008), however, ±nds that income and education only slightly reduce the likelihood that individuals make expectational errors regarding macroeconomic variables, and that these errors adversely a/ect buying attitudes and ±nancial decisions. µany investment income°avoids the top-coding problem entirely. Nevertheless, as an alternative approach, we run Tobit regressions, and ±nd very similar results (available upon request).
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