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Tax Incentives to Saving and Borrowing

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  • Jappelli, Tullio
  • Pistaferri, Luigi

Abstract

The Paper reviews the literature on these tax incentives, with special focus on long-term saving, housing, and household liabilities. The Paper addresses several areas of policy intervention: (1) the interest rate effect on personal saving; (2) the effect of tax incentives on long-term mandatory saving programmes; (3) government programmes that target saving for home purchase; (4) government programmes that target health and saving for education; (5) the effect of tax incentives to borrow, rather than to save. For each of these five important issues, the Paper provides empirical evidence on the main characteristics of government programmes, with a special focus on middle-income countries. It also addresses a number of issues that should be of interest to policy-makers. First of all, on which grounds government policy should target some assets rather than others. Second, if tax-sheltered assets and liabilities lead to substitution away from more heavily taxed savings instruments or if they affect the overall level of saving. Finally, if there is any lesson that can be drawn from the experience of developed countries for the design of saving and borrowing incentives in middle-income countries.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3881.

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Date of creation: May 2003
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Handle: RePEc:cpr:ceprdp:3881

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Related research

Keywords: borrowing; saving; tax incentives;

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References

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  1. Alfredo Cuevas & G. A. Mackenzie & Philip R. Gerson, 1997. "Pension Regimes and Saving," IMF Occasional Papers 153, International Monetary Fund.
  2. Jappelli, Tullio & Pistaferri, Luigi, 2001. "Tax Incentives and the Demand for Life Insurance: Evidence from Italy," CEPR Discussion Papers 2787, C.E.P.R. Discussion Papers.
  3. Souleles, Nicholas S., 2000. "College tuition and household savings and consumption," Journal of Public Economics, Elsevier, vol. 77(2), pages 185-207, August.
  4. Tobias J. Moskowitz & Annette Vissing-Jorgensen, 2002. "The Returns to Entrepreneurial Investment: A Private Equity Premium Puzzle?," NBER Working Papers 8876, National Bureau of Economic Research, Inc.
  5. B. Douglas Bernheim, 1999. "Taxation and Saving," Working Papers 99007, Stanford University, Department of Economics.
  6. Feldstein, Martin S, 1976. "Personal Taxation and Portfolio Composition: An Econometric Analysis," Econometrica, Econometric Society, vol. 44(4), pages 631-50, July.
  7. Loayza, N. & Schmidt, K. & Serven, L., 1999. "What Drives Private Saving Across the World?," Papers 47, Cambridge - Risk, Information & Quantity Signals.
  8. Whitehouse, Edward, 1999. "The tax treatment of funded pensions," Social Protection Discussion Papers 20126, The World Bank.
  9. Tobias J. Moskowitz & Annette Vissing-Jørgensen, 2002. "The Returns to Entrepreneurial Investment: A Private Equity Premium Puzzle?," American Economic Review, American Economic Association, vol. 92(4), pages 745-778, September.
  10. Jeannine Bailliu & Helmut Reisen, 1998. "Do funded pensions contribute to higher aggregate savings? A cross-country analysis," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 134(4), pages 692-711, December.
  11. Brigitte C. Madrian & Dennis F. Shea, 2001. "THE POWER OF SUGGESTION: INERTIA IN 401(k) PARTICIPATION AND SAVINGS BEHAVIOR," The Quarterly Journal of Economics, MIT Press, vol. 116(4), pages 1149-1187, November.
  12. Poterba, James M. (ed.), 1994. "Public Policies and Household Saving," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226676180, January.
  13. William G. Gale, 1998. "The Effects of Pensions on Household Wealth: A Reevaluation of Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 106(4), pages 706-723, August.
  14. Eric M. Engen & William G. Gale & John Karl Scholz, 1996. "The Illusory Effects of Saving Incentives on Saving," Journal of Economic Perspectives, American Economic Association, vol. 10(4), pages 113-138, Fall.
  15. De Gregorio, Jose, 1996. "Borrowing constraints, human capital accumulation, and growth," Journal of Monetary Economics, Elsevier, vol. 37(1), pages 49-71, February.
  16. James M. Poterba, 2001. "Taxation and Portfolio Structure: Issues and Implications," NBER Working Papers 8223, National Bureau of Economic Research, Inc.
  17. H. M. Shefrin & Richard Thaler, 1977. "An Economic Theory of Self-Control," NBER Working Papers 0208, National Bureau of Economic Research, Inc.
  18. Bayoumi, Tamim & Masson, Paul R & Samiei, Hossein, 1996. "International Evidence on the Determinants of Saving," CEPR Discussion Papers 1368, C.E.P.R. Discussion Papers.
  19. Holzmann, Robert & Mac Arthur, Ian W. & Sin, Yvonne, 2000. "Pension systems in East Asia and the Pacific : challenges and opportunities," Social Protection Discussion Papers 23088, The World Bank.
  20. James M. Poterba & Steven F. Venti & David A. Wise, 1996. "How Retirement Saving Programs Increase Saving," Journal of Economic Perspectives, American Economic Association, vol. 10(4), pages 91-112, Fall.
  21. Hall, Robert E, 1978. "Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 971-87, December.
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Cited by:
  1. Bank for International Settlements, 2006. "Housing finance in the global financial market," CGFS Papers, Bank for International Settlements, number 26, March.

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