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Are Rising Wage Profiles a Forced-Saving Mechanism?

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David Neumark

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Abstract

This paper tests the hypothesis that rising earnings profiles are a mechanism by which individuals engage in forced saving. It does this by examining the cross-sectional relationship between overwithholding on income tax payments--behavior that is consistent with a preference for forced saving--and the slopes of age-earnings profiles. The force-saving hypothesis receives some support from earnings regression estimates. Individuals who receive tax refunds are on earnings profiles that are steeper and have lower intercepts, although the evidence is statistically significant in only a subset of the specifications estimated. On average, individuals who receive refunds have about one percentage point faster earnings growth per year.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4213.

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Date of creation: Nov 1992
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Handle: RePEc:nbr:nberwo:4213

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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.:
  1. Loewenstein, George F & Sicherman, Nachum, 1991. "Do Workers Prefer Increasing Wage Profiles?," Journal of Labor Economics, University of Chicago Press, vol. 9(1), pages 67-84, January. [Downloadable!] (restricted)
  2. Medoff, James L & Abraham, Katharine G, 1980. "Experience, Performance, and Earnings," The Quarterly Journal of Economics, MIT Press, vol. 95(4), pages 703-36, December. [Downloadable!] (restricted)
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  3. Salop, Joanne & Salop, Steven, 1976. "Self-Selection and Turnover in the Labor Market," The Quarterly Journal of Economics, MIT Press, vol. 90(4), pages 619-27, November. [Downloadable!] (restricted)
  4. George Loewenstein & Richard H Thaler, 2003. "Anomalies: Intertemporal Choice," Levine's Working Paper Archive 618897000000000784, David K. Levine. [Downloadable!]
  5. Thaler, Richard H & Shefrin, H M, 1981. "An Economic Theory of Self-Control," Journal of Political Economy, University of Chicago Press, vol. 89(2), pages 392-406, April. [Downloadable!] (restricted)
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  6. Lorne Carmichael, 1981. "Firm-Specific Human Capital and Promotion Ladders," Working Papers 452, Queen's University, Department of Economics.
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  7. Yoram Ben-Porath, 1967. "The Production of Human Capital and the Life Cycle of Earnings," Journal of Political Economy, University of Chicago Press, vol. 75, pages 352. [Downloadable!] (restricted)
  8. Linda A. Bell & David Neumark, 1991. "Lump-Sums, Profit Sharing, and the Labor Costs in the Union Sector," NBER Working Papers 3630, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. Joanne Salop & Steve Salop, 1976. "Self-selection and turnover in the labor market," Special Studies Papers 80, Board of Governors of the Federal Reserve System (U.S.).
  10. Milton Harris & Bengt Holmstrom, 1981. "A Theory of Wage Dynamics," Discussion Papers 488, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
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  1. Jagadeesh Gokhale & Erica L. Groshen & David Neumark, 1993. "Do Hostile Takeovers Reduce Extramarginal Wage Payments?," NBER Working Papers 4346, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  2. Louise Sheiner, 1999. "Health care costs, wages, and aging," Finance and Economics Discussion Series 1999-19, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
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