The Effect of Tax-Deferred Retirement Saving Accounts: A Dynamic General Equilibrium Analysis
The present paper constructs a dynamic general-equilibrium OLG model with heterogeneous households and analyzes the effect of tax-deferred retirement saving accounts. When stylized 401(k)-type accounts are introduced, the government tax revenue decreases by 26% in the short run and by 15% in the long run. If the government finances these costs by a onetime income tax increase with government debt, it has to raise the marginal tax rates by 31% to make the policy change sustainable. National wealth and output will decline by 1.4% and 2.8%, respectively, in the long run, and households of all cohorts will be worse off.
|Date of creation:||2009|
|Contact details of provider:|| Postal: Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA|
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- Steven F. Venti & David A. Wise, 1990.
"Have IRAs Increased U. S. Saving?: Evidence from Consumer Expenditure Surveys,"
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NBER Working Papers
8170, National Bureau of Economic Research, Inc.
- Jagadeesh Gokhale & Laurence J. Kotlikoff & Mark J. Warshawsky, 2001. "Life-cycle saving, limits on contributions to DC pension plans, and lifetime tax benefits," Working Paper 0102, Federal Reserve Bank of Cleveland.
- Alex Michaelides & Francisco Gomes & Valery Polkovnichenko, 2006.
"Wealth Accumulation and Portfolio Choice with Taxable and Tax-Deferred Accounts,"
Computing in Economics and Finance 2006
23, Society for Computational Economics.
- Gomes, Francisco J & Michaelides, Alexander & Polkovnichenko, Valery, 2005. "Wealth Accumulation and Portfolio Choice with Taxable and Tax-Deferred Accounts," CEPR Discussion Papers 4852, C.E.P.R. Discussion Papers.
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