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Household Saving Rates and the Design of Social Security Programmes: Evidence from a Country Panel

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  • Richard Disney
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    Abstract

    I argue that the offsetting effect of social security contributions on household retirement saving depends on how closely the social security programme imitates a private retirement saving plan (i.e. the ‘actuarial’ component of the social security programme) – the closer the design of the programme to a private retirement saving plan, the higher the offset. I estimate the determinants of household saving rates in a cross-country panel, augmenting standard measures of social security programme generosity and cost by indicators that proxy the actuarial component of the programme. These indicators affect saving rates as predicted; moreover they also affect labour force participation rates of older women (but not men). The findings are consistent with the view that more actuarially-based public programmes are treated by participants as a mandatory saving programme rather than as a tax-and-transfer system, thereby raising labour force participation rates but also increasing the programme’s substitutability for private retirement saving.

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    Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1541.

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    Date of creation: 2005
    Handle: RePEc:ces:ceswps:_1541
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    Keywords: social security reform; household saving;

    Find related papers by JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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    Cited by:

    1. Creedy, John & Gemmell, Norman & Scobie, Grant, 2015. "Pensions, savings and housing: A life-cycle framework with policy simulations," Economic Modelling, Elsevier, vol. 46(C), pages 346-357.
    2. Richard Disney, 2006. "Macroeconomic Performance and the Design of Public Pension Programmes," The Economic and Social Review, Economic and Social Studies, vol. 37(2), pages 175-195.

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