The Effect of Tax-Deferred Retirement Saving Accounts: A Dynamic General Equilibrium Analysis
AbstractThe 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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Bibliographic InfoPaper provided by Society for Economic Dynamics in its series 2009 Meeting Papers with number 957.
Date of creation: 2009
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Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
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- 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.
- Gomes, Francisco J & Michaelides, Alexander & Polkovnichenko, Valery, 2005. "Wealth Accumulation and Portfolio Choice with Taxable and Tax-Deferred Accounts," CEPR Discussion Papers 4852, C.E.P.R. Discussion Papers.
- 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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