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The effect of mandated savings on private consumption: Evidence from Israel's pension reform

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  • Frish, Roni

Abstract

This study examines the impact of the Government Mandatory Pension Order (GMPO) on household consumption. The GMPO, which came into force in Israel in 2008, required contributing to a pension fund at a gradually increasing rate, up to 17.5 percent of wages in 2014 and afterwards. The study uses a diff-in-diff method to compare the development of household consumption expenditure where the household heads did not contribute to a pension fund before 2008 (“Treated”), with that of a group doing so willingly before 2008 ("Control"). The data sources are Israel's Central Bureau of Statistics’ annual Household Expenditure Surveys for the period 2004 through 2016 and Israel Tax Authority data on personal pension contributions. The study rejects the null hypothesis that the treatment has null effect on the consumption of the treated group in the treatment period. However, since the p-value is between 0.05–0.10 the study could not reject the null hypothesis for the conventional p-value threshold of 0.05.

Suggested Citation

  • Frish, Roni, 2025. "The effect of mandated savings on private consumption: Evidence from Israel's pension reform," Research in Economics, Elsevier, vol. 79(2).
    • Handle: RePEc:eee:reecon:v:79:y:2025:i:2:s1090944325000158
    DOI: 10.1016/j.rie.2025.101038
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