The After Tax Rate of Return Affects Private Savings
AbstractThis paper reviews theoretical argumrents and empirical evidence regarding the interest elasticity of savings. It concludes that there are strong theoretical reasons to expect an increase in after tax rates of return to increase private savings. Moreover, the empirical rrethods used in most previous studies are likely to produce underestimates of the interestelasticity of savings. New evidence based on direct estimation of utility function parameters suggests that savings are likely to be highly interest elastic. The paper concludes by noting that too little time has passed to evaluate the effects of the savings incentives contained in recent tax legislation.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1351.
Date of creation: Aug 1984
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- Summers, Lawrence H, 1984. "The After-Tax Rate of Return Affects Private Savings," American Economic Review, American Economic Association, vol. 74(2), pages 249-53, May.
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