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Are Rising Wage Profiles a Forced-Saving Mechanism?

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  • David Neumark

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.

Suggested Citation

  • David Neumark, 1992. "Are Rising Wage Profiles a Forced-Saving Mechanism?," NBER Working Papers 4213, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:4213
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    Cited by:

    1. Gokhale, Jagadeesh & Groshen, Erica L & Neumark, David, 1995. "Do Hostile Takeovers Reduce Extramarginal Wage Payments?," The Review of Economics and Statistics, MIT Press, vol. 77(3), pages 470-485, August.
    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.).

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