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Do Savers Respond to Tax Incentives? The Case of Retirement Savings

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  • Clément Carbonnier
  • Alexis Direr
  • Ihssane Slimani-Houti

Abstract

This article exploits a large micro-_le tax return data to test whether savers respond to the presence of tax incentives by contributing more in saving accounts that mandate annuitization at retirement. A frictionless model of demand for annuity is first set, which highlights the phenomenon of bunching of savers around tax thresholds when consumers' budget set is kinked. Using French households income tax data, we do not find any bunching, which is consistent either with the absence of behavioral responsiveness to tax incentives or optimization frictions. We investigate the implications of the second hypothesis and propose an alternative test in which discontinuity in marginal rate of return on the two sides of tax thresholds is exploited. We find that the deduction scheme is effective in boosting the demand for annuity of the richest savers whose marginal tax rate is the highest, especially for the oldest savers (aged 45 and above). In most cases, it fails to raise contributions of younger and less wealthy savers.

Suggested Citation

  • Clément Carbonnier & Alexis Direr & Ihssane Slimani-Houti, 2014. "Do Savers Respond to Tax Incentives? The Case of Retirement Savings," Annals of Economics and Statistics, GENES, issue 113-114, pages 225-256.
    • Handle: RePEc:adr:anecst:y:2014:i:113-114:p:225-256
    DOI: 10.15609/annaeconstat2009.113-114.225
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    Cited by:

    1. Clément Carbonnier & Charlotte Foffano & Clément Malgouyres & Loriane Py & Camille Urvoy, 2018. "Évaluation interdisciplinaire des impacts du CICE en matière d’emplois et de salaires," SciencePo Working papers Main hal-03393124, HAL.
    2. repec:spo:wpmain:info:hdl:2441/7lfmtcll678th9ldbi6o2t0onk is not listed on IDEAS
    3. Fack, Gabrielle & Landais, Camille, 2016. "The effect of tax enforcement on tax elasticities: Evidence from charitable contributions in France," Journal of Public Economics, Elsevier, vol. 133(C), pages 23-40.
    4. Clément Carbonnier & Clément Malgouyres & Loriane Py & Camille Urvoy, 2019. "Wage Incidence of a Large Corporate Tax Credit: Contrasting Employee - and Firm - Level Evidence," Working Papers hal-03393095, HAL.
    5. repec:hal:spmain:info:hdl:2441/7lfmtcll678th9ldbi6o2t0onk is not listed on IDEAS

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