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Have IRAs Increased U.S. Saving? Evidence from Consumer Expenditure Surveys

  • Venti, Steven F
  • Wise, David A

The vast majority of individual retirement account (IRA) contributions represent net new saving, based on evidence from the quarterly Consumer Expenditure Surveys. The results are based on analysis of the relationship between IRA contributions and other financial asset saving. The data show almost no substitution of IRAs for other saving. Estimates are based on a flexible constrained optimization model, with the IRA limit the principal constraint. The implications of this model for saving in the absence of the IRA option match very closely the actual non-IRA financial asset saving behavior prior to 1982. IRA saving does not show up as other financial asset saving in the pre-IRA period. Copyright 1990, the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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Article provided by MIT Press in its journal Quarterly Journal of Economics.

Volume (Year): 105 (1990)
Issue (Month): 3 (August)
Pages: 661-98

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Handle: RePEc:tpr:qjecon:v:105:y:1990:i:3:p:661-98
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  1. Steven F. Venti & David A. Wise, 1987. "IRAs and Saving," NBER Chapters, in: The Effects of Taxation on Capital Accumulation, pages 7-52 National Bureau of Economic Research, Inc.
  2. B. Douglas Bernheim & John B. Shoven, 1988. "Pension Funding and Saving," NBER Chapters, in: Pensions in the U.S. Economy, pages 85-114 National Bureau of Economic Research, Inc.
  3. Zvi Bodie & John B. Shoven & David A. Wise, 1988. "Pensions in the U.S. Economy," NBER Books, National Bureau of Economic Research, Inc, number bodi88-1, June.
  4. Zvi Bodie & John B. Shoven, 1983. "Financial Aspects of the United States Pension System," NBER Books, National Bureau of Economic Research, Inc, number bodi83-1, June.
  5. Mervyn A. King & Jonathan I. Leape, 1984. "Wealth and Portfolio Composition: Theory and Evidence," NBER Working Papers 1468, National Bureau of Economic Research, Inc.
  6. Venti, Steven F & Wise, David A, 1986. "Tax-Deferred Accounts, Constrained Choice and Estimation of Individual Saving," Review of Economic Studies, Wiley Blackwell, vol. 53(4), pages 579-601, August.
  7. Deaton, Angus & Meullbauer, John, 1981. "Functional Forms for Labor Supply and Commodity Demands with and without Quantity Restrictions," Econometrica, Econometric Society, vol. 49(6), pages 1521-32, November.
  8. Diamond, P. A. & Hausman, J. A., 1984. "Individual retirement and savings behavior," Journal of Public Economics, Elsevier, vol. 23(1-2), pages 81-114.
  9. Steven F. Venti & David A. Wise, 1988. "The Determinants of IRA Contributions and the Effect of Limit Changes," NBER Chapters, in: Pensions in the U.S. Economy, pages 9-52 National Bureau of Economic Research, Inc.
  10. Michael D. Hurd & John B. Shoven, 1982. "The Economic Status of the Elderly," NBER Working Papers 0914, National Bureau of Economic Research, Inc.
  11. Lawrence H. Summers, 1985. "Issues in National Savings Policy," NBER Working Papers 1710, National Bureau of Economic Research, Inc.
  12. Laurence J. Kotlikoff, 1984. "Taxation and Savings - A Neoclassical Perspective," NBER Working Papers 1302, National Bureau of Economic Research, Inc.
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