IDEAS home Printed from https://ideas.repec.org/a/ctf/journl/v67y2019i2p309-333.html
   My bibliography  Save this article

An Empirical Analysis of the Displacement Effect of TFSAs on RRSPs

Author

Listed:
  • Leslie Berger

    (Wilfrid Laurier University, Waterloo, ON)

  • Jonathan Farrar

    (Wilfrid Laurier University, Waterloo, ON)

  • Lu Zhang

    (Ryerson University, Toronto)

Abstract

The tax-free savings account (TFSA), introduced in 2009, was intended by the Canadian government to provide an alternative catchment for savings in addition to registered retirement savings plans (RRSPs). However, little empirical evidence exists regarding the impact of saving in TFSAs on saving in RRSPs. To investigate this issue, we conduct empirical analysis, using data from Statistics Canada's Longitudinal Administrative Databank, which contains annual TFSA and RRSP contributions for a sample of 20 percent of all Canadian taxfilers. We find evidence of a displacement effect of TFSAs on RRSPs: every 1 percent increase in a TFSA contribution reduces an RRSP contribution by approximately 0.4 percent. Our findings have implications for Canadians' ability to self-fund their retirement, as well as for the Canadian government's ability to generate future tax revenues.

Suggested Citation

  • Leslie Berger & Jonathan Farrar & Lu Zhang, 2019. "An Empirical Analysis of the Displacement Effect of TFSAs on RRSPs," Canadian Tax Journal, Canadian Tax Foundation, vol. 67(2), pages 309-333.
    • Handle: RePEc:ctf:journl:v:67:y:2019:i:2:p:309-333
    DOI: https://doi.org/10.32721/ctj.2019.67.2.berger
    as

    Download full text from publisher

    File URL: https://www.ctf.ca/ctfweb/EN/Publications/CTJ_Contents/2019CTJ2.aspx
    Download Restriction: no
    File URL: https://libkey.io/https://doi.org/10.32721/ctj.2019.67.2.berger?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ctf:journl:v:67:y:2019:i:2:p:309-333. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Jim Lyons (email available below). General contact details of provider: https://www.ctf.ca/EN .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.