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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.

Suggested Citation

  • Jarkko Harju, 2009. "Voluntary pension savings: the effects of the finnish tax reform on savers’ behaviour," Working Papers 2009/22, Institut d'Economia de Barcelona (IEB).
    • Handle: RePEc:ieb:wpaper:doc2009-22
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    References listed on IDEAS

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    5. Richard Disney & Carl Emmerson & Matthew Wakefield, 2007. "Tax reform and retirement saving incentives: evidence from the introduction of stakeholder pensions in the UK," IFS Working Papers W07/19, Institute for Fiscal Studies.
    6. Hans Fehr & Christian Habermann & Fabian Kindermann, 2008. "Tax-Favored Retirement Accounts: Are they Efficient in Increasing Savings and Growth?," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 64(2), pages 171-198, June.
    7. Angrist, Joshua D, 2001. "Estimations of Limited Dependent Variable Models with Dummy Endogenous Regressors: Simple Strategies for Empirical Practice: Reply," Journal of Business & Economic Statistics, American Statistical Association, vol. 19(1), pages 27-28, January.
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    Cited by:

    1. Ossi Korkeamäki & Tomi Kyyrä, 2012. "Institutional rules, labour demand and retirement through disability programme participation," Journal of Population Economics, Springer;European Society for Population Economics, vol. 25(2), pages 439-468, January.
    2. Heléne Lundqvist, 2015. "Granting public or private consumption? Effects of grants on local public spending and income taxes," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 22(1), pages 41-72, February.
    3. Korkeamäki, Ossi, 2011. "The Finnish payroll tax cut experiment revisited," Working Papers 22, VATT Institute for Economic Research.

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    More about this item

    Keywords

    voluntary pension savings; tax reform; tax incentives;
    All these keywords.

    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; Switching Regression Models; Threshold Regression Models

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