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

  • Richard Disney
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    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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    File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2005/wp-cesifo-2005-09/cesifo1_wp1541.pdf
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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
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    Handle: RePEc:ces:ceswps:_1541
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    20. Eric M. Engen & William G. Gale, 1997. "Effects of Social Security reform on private and national saving," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 41(Jun), pages 103-142.
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    22. Tullio Jappelli & Franco Modigliani, 1998. "The Age-Saving Profile and the Life-Cycle Hypothesis," CSEF Working Papers 09, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    23. Orazio P. Attanasio & Agar Brugiavini, 2003. "Social Security and Households' Saving," The Quarterly Journal of Economics, Oxford University Press, vol. 118(3), pages 1075-1119.
    24. Richard Disney, 2004. "Are contributions to public pension programmes a tax on employment?," Economic Policy, CEPR;CES;MSH, vol. 19(39), pages 267-311, 07.
    25. Erwin Ooghe & Erik Schokkaert & Jef Flechet, 2003. "The Incidence of Social Security Contributions: An Empirical Analysis," Empirica, Springer, vol. 30(2), pages 81-106, June.
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    27. Martin Feldstein, 1995. "Social Security and Saving: New Time Series Evidence," NBER Working Papers 5054, National Bureau of Economic Research, Inc.
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