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Taxing the Wealth of the Poor: Evidence from the Danish Old-Age Support Asset Test

Author

Listed:
  • Niels Johannesen
  • Johan Sæverud
  • Emmanuel Saez

Abstract

We document strong behavioral responses to an asset test for an old-age support program in Denmark using comprehensive administrative data. We show that the density distribution of the liquid assets targeted by the test exhibits large but diffuse excess mass below the threshold for the treated group relative to control groups of comparable but ineligible individuals. A cohort analysis exploiting the panel structure suggests that the program reduces liquid assets by 20 percent around the threshold. Analyzing high-frequency bank data on assets and cash withdrawals shows that the excess mass around the threshold largely reflects permanent rather than temporary responses.

Suggested Citation

  • Niels Johannesen & Johan Sæverud & Emmanuel Saez, 2026. "Taxing the Wealth of the Poor: Evidence from the Danish Old-Age Support Asset Test," American Economic Review: Insights, American Economic Association, vol. 8(2), pages 247-264, June.
    • Handle: RePEc:aea:aerins:v:8:y:2026:i:2:p:247-64
    DOI: 10.1257/aeri.20240634
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    More about this item

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination

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