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The effects of the introduction of tax incentives on retirement savings

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Author Info

  • Juan Ayuso

    ()
    (Banco de España)

  • Juan F. Jimeno

    ()
    (Banco de España
    Centre for Economic Policy Research (CEPR)
    Institute for the Study of Labor (IZA))

  • Ernesto Villanueva

    ()
    (Banco de España)

Abstract

This paper uses a Spanish panel of tax returns and another on household expenditure during the period 1985-1991 to examine the incidence of the introduction in 1988 of tax incentives to retirement savings on contributions to pension funds and on savings. We first identify the population cohorts who most used these incentives. Then we use data on the evolution of consumption of these cohorts to find that there is substantial heterogeneity in the response of household saving to tax incentives. Most contributions to pension funds are by older/high income individuals. While the overall amount of new saving we estimate is limited (at most 25 cents per euro contributed on average), saving responses differ substantially across age groups. In particular, we document very small consumption drops among the group of households between 56 and 65 years of age, the group that most actively contributed to the plan, while we find instead a larger decrease in consumption expenditures of the group of households between 46 and 55 years of age.

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File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/07/Fic/dt0724e.pdf
File Function: First version, July 2007
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Bibliographic Info

Paper provided by Banco de Espa�a in its series Banco de Espa�a Working Papers with number 0724.

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Length: 49 pages
Date of creation: Jul 2007
Date of revision:
Handle: RePEc:bde:wpaper:0724

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Keywords: pension funds; tax incentives; savings;

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Citations

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Cited by:
  1. Robert P. Hagemann, 2012. "Fiscal Consolidation: Part 6. What Are the Best Policy Instruments for Fiscal Consolidation?," OECD Economics Department Working Papers 937, OECD Publishing.
  2. Isabel Argimón & Pablo Hernández de Cos, 2008. "The determinants of budget balances of the regional (Autonomous) governments," Banco de Espa�a Working Papers, Banco de Espa�a 0803, Banco de Espa�a.
  3. Littlewood, Michael, 2014. "Ageing populations, retirement incomes and public policy: what really matters," MPRA Paper 56232, University Library of Munich, Germany.
  4. Aitor Erce, 2008. "A structural model of sovereign debt issuance: assessing the role of financial factors," Banco de Espa�a Working Papers, Banco de Espa�a 0809, Banco de Espa�a.
  5. Agustín Maravall & Ana del Río, 2007. "Temporal aggregation, systematic sampling, and the Hodrick-Prescott filter," Banco de Espa�a Working Papers, Banco de Espa�a 0728, Banco de Espa�a.

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