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

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Listed author(s):
  • Steven F. Venti
  • David A. Wise

Abstract

The vast majority of Individual Retirement Account contributions represent net new saving, based on evidence from the quarterly Consumer Expenditure Surveys (CES). 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. While the core of the paper is based on cross-section analysis, important use is made of the CES panel of independent cross-sections that span the period during which IRAs were introduced. Estimates for the post 1982 period, when IRAs were available to all employees, are based on a flexible constrained optimization model, with the IRA limit the principle 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.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2217.

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Date of creation: Apr 1987
Publication status: published as Quarterly Journal of Economics, Vol. 105, pp. 661-698, August 1990.
Handle: RePEc:nbr:nberwo:2217
Note: PE AG
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  1. Steven F. Venti & David A. Wise, 1986. "Tax-Deferred Accounts, Constrained Choice and Estimation of Individual Saving," Review of Economic Studies, Oxford University Press, vol. 53(4), pages 579-601.
  2. Kotlikoff, Laurence J, 1984. "Taxation and Savings: A Neoclassical Perspective," Journal of Economic Literature, American Economic Association, vol. 22(4), pages 1576-1629, December.
  3. 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.
  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. Michael D. Hurd & John B. Shoven, 1983. "The Economic Status of the Elderly," NBER Chapters,in: Financial Aspects of the United States Pension System, pages 359-398 National Bureau of Economic Research, Inc.
  6. 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.
  7. 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.
  8. 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 1521-1532, November.
  9. Diamond, P. A. & Hausman, J. A., 1984. "Individual retirement and savings behavior," Journal of Public Economics, Elsevier, vol. 23(1-2), pages 81-114.
  10. Lawrence H. Summers, 1985. "Issues in National Savings Policy," NBER Working Papers 1710, National Bureau of Economic Research, Inc.
  11. 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.
  12. Mervyn A. King & Jonathan I. Leape, 1984. "Wealth and Portfolio Composition: Theory and Evidence," NBER Working Papers 1468, National Bureau of Economic Research, Inc.
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