Voluntary pension savings: the effects of the finnish tax reform on savers’ behaviour

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Voluntary pension savings: the effects of the finnish tax reform on savers’ behaviour

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Jarkko Harju () (Government Institute for Economic Research)

Abstract

Many countries tax voluntary pension savings using the so-called EET model, based on tax-deductible savings and taxable withdrawals. In Finland the tax reform of 2005 changed the tax rate schedule from progressive to proportional, while the basic structure of the EET model was retained. This paper studies empirically the savers’ behavioural changes as a result of the reform using individual level data. The econometric estimations indicate that the reform altered pension saving behaviour by reducing the labour income and age effects on saving contributions in a statistically significant way. Also, the reform reduced the number of pension savers among high income-earners.

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Paper provided by Institut d'Economia de Barcelona (IEB) in its series Working Papers with number 2009/22.

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Length: 29 pages
Date of creation: 2009
Date of revision:
Handle: RePEc:ieb:wpaper:2009/10/doc2009-22

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Find related papers by JEL classification:
H2 - Public Economics - - Taxation, Subsidies, and Revenue
H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models

This paper has been announced in the following NEP Reports:

NEP-AGE-2009-11-14 (Economics of Ageing)
NEP-ALL-2009-11-14 (All new papers)
NEP-PUB-2009-11-14 (Public Finance)

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

Bernheim, B. Douglas, 2002. "Taxation and saving," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 18, pages 1173-1249 Elsevier. [Downloadable!] (restricted)
Other versions:
- B. Douglas Bernheim, 1999. "Taxation and Saving," NBER Working Papers 7061, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
- B. Douglas Bernheim, 1999. "Taxation and Saving," Working Papers 99007, Stanford University, Department of Economics. [Downloadable!]
Eric M. Engen & William G. Gale & John Karl Scholz, 1994. "Do Saving Incentives Work?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(1994-1), pages 85-180. [Downloadable!]
Benjamin, Daniel J., 2003. "Does 401(k) eligibility increase saving?: Evidence from propensity score subclassification," Journal of Public Economics, Elsevier, vol. 87(5-6), pages 1259-1290, May. [Downloadable!] (restricted)
Ai, Chunrong & Norton, Edward C., 2003. "Interaction terms in logit and probit models," Economics Letters, Elsevier, vol. 80(1), pages 123-129, July. [Downloadable!] (restricted)

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