Private Retirement Savings in Germany: The Structure of Tax Incentives and Annuitization
AbstractThe present paper studies the growth, welfare and efficiency consequences of the recent introduction of tax-favored retirement accounts in Germany in a general equilibrium overlapping generations model with idiosyncratic lifespan and labor income uncertainty. We focus on the implicit differential taxation of specific savings motives, the mandatory annuitization of benefits and the impact of special provisions for low-income households. The simulations indicate that the reform improves overall economic efficiency by about 0.6 percent of aggregate resources, but welfare decreases significantly for future generations. Finally, we show that special provisions could be very effective in raising the participation of low-income households despite their low budgetary cost.
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Bibliographic InfoPaper provided by DIW Berlin, The German Socio-Economic Panel (SOEP) in its series SOEPpapers on Multidisciplinary Panel Data Research with number 133.
Length: 28 p.
Date of creation: 2008
Date of revision:
Individual retirement accounts; annuities; stochastic general equilibrium;
Other versions of this item:
- Hans Fehr & Christian Habermann, 2008. "Private Retirement Savings in Germany: The Structure of Tax Incentives and Annuitization," CESifo Working Paper Series 2238, CESifo Group Munich.
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
- J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-10-28 (All new papers)
- NEP-DGE-2008-10-28 (Dynamic General Equilibrium)
- NEP-EEC-2008-10-28 (European Economics)
- NEP-PUB-2008-10-28 (Public Finance)
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