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Can governments boost voluntary retirement savings via tax incentives and subsidies? A German case study for low-income households

Author

Listed:
  • Corneo, Giacomo
  • Keese, Matthias
  • Schröder, Carsten

Abstract

Since 2002 the German government has promoted private retirement saving plans by means of special subsidies and tax incentives (Riester scheme). This policy mainly targets low-income households. Using data from the German Socio-economic Panel, we scrutinize the impact of the Riester scheme on private savings. Our empirical strategy consists of treating the introduction of the Riester scheme as a natural experiment. The estimation results cast some doubts on the effectiveness of the Riester scheme in raising private savings and call for enhanced systematic efforts to evaluate that policy.

Suggested Citation

  • Corneo, Giacomo & Keese, Matthias & Schröder, Carsten, 2008. "Can governments boost voluntary retirement savings via tax incentives and subsidies? A German case study for low-income households," Economics Working Papers 2008-18, Christian-Albrechts-University of Kiel, Department of Economics.
  • Handle: RePEc:zbw:cauewp:7413
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    References listed on IDEAS

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    1. Borsch-Supan, Axel & Reil-Held, Anette & Rodepeter, Ralf & Schnabel, Reinhold & Winter, Joachim, 2001. "The German Savings Puzzle," Research in Economics, Elsevier, vol. 55(1), pages 15-38, March.
    2. Pablo Antolín & Alain de Serres & Christine de la Maisonneuve, 2004. "Long-Term Budgetary Implications of Tax-Favoured Retirement Plans," OECD Economics Department Working Papers 393, OECD Publishing.
    3. Börsch-Supan, Axel & Reil-Held, Anette & Schunk, Daniel, 2006. "Das Sparverhalten deutscher Haushalte : Erste Erfahrungen mit der Riester-Rente," Papers 07-15, Sonderforschungsbreich 504.
    4. Nicola Fuchs-Schundeln, 2008. "The Response of Household Saving to the Large Shock of German Reunification," American Economic Review, American Economic Association, vol. 98(5), pages 1798-1828, December.
    5. Breyer, Friedrich, 2001. "Why Funding is not a Solution to the "Social Security Crisis"," IZA Discussion Papers 328, Institute for the Study of Labor (IZA).
    6. Felix Freyland, 2005. "Household Composition and Savings: An Empirical Analysis based on the German SOEP Data," MEA discussion paper series 05088, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
    7. Richard Blundell & Monica Costa Dias, 2000. "Evaluation methods for non-experimental data," Fiscal Studies, Institute for Fiscal Studies, vol. 21(4), pages 427-468, January.
    8. Kwang-Yeol Yoo & Alain de Serres, 2004. "Tax Treatment of Private Pension Savings in OECD Countries and the Net Tax Cost Per Unit of Contribution to Tax-Favoured Schemes," OECD Economics Department Working Papers 406, OECD Publishing.
    9. Nicola Fuchs-Schündeln, 2008. "The Response of Household Saving to the Large Shock of German Reunification," Working Papers, Center for Retirement Research at Boston College wp2008-21, Center for Retirement Research, revised Dec 2008.
    10. Klaus-Dietrich Bedau, 1999. "Ersparnis und Vorsorgeaufwendungen nach Haushaltsgruppen," Discussion Papers of DIW Berlin 187, DIW Berlin, German Institute for Economic Research.
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    Citations

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    Cited by:

    1. Ihle, Dorothee, 2017. "Quantile treatment effects of Riester participation on wealth," CAWM Discussion Papers 96, University of Münster, Center of Applied Economic Research Münster (CAWM).
    2. Pfarr, Christian & Schneider, Udo, 2009. "Angebotsinduzierung und Mitnahmeeffekt im Rahmen der Riester-Rente. Eine empirische Analyse
      [Demand inducement, crowding in and the German Riester pension scheme. (Angebotsinduzierung und Mitnahmee
      ," MPRA Paper 17759, University Library of Munich, Germany.
    3. Immacolata Marino & Filippo Pericoli & Luigi Ventura, 2011. "Tax Incentives and Household Investment in Complementary Pension Insurance: Some Recent Evidence From the Italian Experience," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 14(2), pages 247-263, September.
    4. Richard Ochmann, 2014. "Differential income taxation and household asset allocation," Applied Economics, Taylor & Francis Journals, vol. 46(8), pages 880-894, March.
    5. Robert P. Hagemann, 2012. "Fiscal Consolidation: Part 6. What Are the Best Policy Instruments for Fiscal Consolidation?," OECD Economics Department Working Papers 937, OECD Publishing.
    6. Dorothee Ihle, 2017. "Quantile Treatment Effects of Riester Participation on Wealth," SOEPpapers on Multidisciplinary Panel Data Research 954, DIW Berlin, The German Socio-Economic Panel (SOEP).

    More about this item

    Keywords

    retirement saving; Riester scheme; tax incentives; subsidy incentives; pensions; treatment analysis;

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance

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