Tax Subsidies and Household Saving: Evidence from Canada
Targeted tax-based saving incentives can be a powerful tool for promoting household and national saving. This study examines the effect of the cancellation of the Registered Home Ownership Savings Plan, a Canadian tax-subsidized saving program, on household saving. The cancellation provides exogenous variation in eligibility for the subsidy that is uncorrelated with household-specific heterogeneity in saving behavior. The empirical analysis suggests that the subsidy had a substantial impact on saving: each dollar contributed to the program represented 56-93 and 20-67 cents of new household and national saving, respectively. Copyright 1996, the President and Fellows of Harvard College and the Massachusetts Institute of Technology.
Volume (Year): 111 (1996)
Issue (Month): 4 (November)
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