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Do tax incentives for saving in pension accounts cause debt accumulation? Evidence from Danish register data

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  • Andersen, Henrik Yde

Abstract

This paper applies a quasi-experimental research design on a Danish 2010 policy that reduced tax incentives for saving in annuity pension schemes to show significant substitution of savings from retirement accounts to gross debt repayments. We find that for every 1 Danish currency unit reduction in retirement savings 31 cents goes to debt repayments. Taking into account all types of savings, we find full crowding-out. Consistent with previous findings, we document that the effect is driven by a minority, about 23 percent, who actively rebalance their savings.

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  • Andersen, Henrik Yde, 2018. "Do tax incentives for saving in pension accounts cause debt accumulation? Evidence from Danish register data," European Economic Review, Elsevier, vol. 106(C), pages 35-53.
  • Handle: RePEc:eee:eecrev:v:106:y:2018:i:c:p:35-53
    DOI: 10.1016/j.euroecorev.2018.04.007
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    Keywords

    Crowding-out; Pension savings; Household debt;

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