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The Effect of Tax-Deferred Retirement Saving Accounts: A Dynamic General Equilibrium Analysis

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  • Shinichi Nishiyama

    (Georgia State University)

Abstract

The present paper constructs a dynamic general-equilibrium OLG model with heterogeneous households and analyzes the effect of tax-deferred retirement saving accounts. When stylized 401(k)-type accounts are introduced, the government tax revenue decreases by 26% in the short run and by 15% in the long run. If the government finances these costs by a onetime income tax increase with government debt, it has to raise the marginal tax rates by 31% to make the policy change sustainable. National wealth and output will decline by 1.4% and 2.8%, respectively, in the long run, and households of all cohorts will be worse off.

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Paper provided by Society for Economic Dynamics in its series 2009 Meeting Papers with number 957.

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Date of creation: 2009
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Handle: RePEc:red:sed009:957

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  1. Alex Michaelides & Francisco Gomes & Valery Polkovnichenko, 2006. "Wealth Accumulation and Portfolio Choice with Taxable and Tax-Deferred Accounts," Computing in Economics and Finance 2006 23, Society for Computational Economics.
  2. Orazio P. Attanasio & Thomas DeLeire, 2002. "The Effect Of Individual Retirement Accounts On Household Consumption And National Saving," Economic Journal, Royal Economic Society, vol. 112(6), pages 504-538, July.
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