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Do Tax Subsidies for Retirement Saving Impact Total Private Saving? New Evidence on Middle-income Workers

Author

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  • Camilla Skovbo Christensen

    (University of Copenhagen, Center for Economic Behavior and Inequality)

  • Bastian Emil Ellegaard

    (University of Copenhagen, Department of Economics)

Abstract

We exploit exogenous variation from a pension reform in Denmark to estimate the effect of tax subsidies on total private saving. We present new evidence on individuals in the middle of the income distribution and show that a reduction in tax subsidies for retirement saving reduces total private saving. The reform changed the tax incentives for saving in the pension scheme that holds the highest tax advantage for middle-income workers in Denmark. We find that for each unit of reduced saving in this pension scheme, only 63 percent is substituted to other types of saving.

Suggested Citation

  • Camilla Skovbo Christensen & Bastian Emil Ellegaard, 2022. "Do Tax Subsidies for Retirement Saving Impact Total Private Saving? New Evidence on Middle-income Workers," CEBI working paper series 22-17, University of Copenhagen. Department of Economics. The Center for Economic Behavior and Inequality (CEBI).
    • Handle: RePEc:kud:kucebi:2217
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    File URL: https://www.econ.ku.dk/cebi/publikationer/working-papers/CEBI_WP_17-22.rev.pdf
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    References listed on IDEAS

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    Cited by:

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    More about this item

    Keywords

    Crowd-out; Savings; Retirement; Tax incentives; Household Finance;
    All these keywords.

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth

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