IDEAS home Printed from https://ideas.repec.org/p/zbw/fubsbe/201518.html
   My bibliography  Save this paper

Distributional effects of subsidizing retirement savings accounts: Evidence from Germany

Author

Listed:
  • Corneo, Giacomo
  • Schröder, Carsten
  • König, Johannes

Abstract

We empirically investigate the distributional consequences of the Riester scheme, the main private pension subsidization program in Germany. We find that 38% of the aggregate subsidy accrues to the top two deciles of the population, but only 7.3% to the bottom two. Nonetheless the Riester scheme is almost distributionally neutral when looking at standard inequality measures. This is due to two offsetting effects: a progressive one stemming from the subsidy schedule and a regressive one from voluntary participation. Regressions of the participation decision suggest that a high level of household wealth significantly increases the probability of benefiting from the Riester scheme.

Suggested Citation

  • Corneo, Giacomo & Schröder, Carsten & König, Johannes, 2015. "Distributional effects of subsidizing retirement savings accounts: Evidence from Germany," Discussion Papers 2015/18, Free University Berlin, School of Business & Economics.
    • Handle: RePEc:zbw:fubsbe:201518
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/110989/1/827713673.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Eurosystem Household Finance and Consumption Network, 2013. "The Eurosystem Household Finance and Consumption Survey - Methodological report," Statistics Paper Series 1, European Central Bank.
    2. Raj Chetty & John N. Friedman & Soren Leth-Petersen & Torben Heien Nielsen & Tore Olsen, 2013. "Subsidies vs. Nudges: Which Policies Increase Saving the Most?," Issues in Brief ib2013-3, Center for Retirement Research.
    3. Eisele, Martin & Zhu, Junyi, 2013. "Multiple imputation in a complex household survey - the German Panel on Household Finances (PHF): challenges and solutions," EconStor Preprints 100007, ZBW - Leibniz Information Centre for Economics.
    4. Viktor Steiner & Katharina Wrohlich & Peter Haan & Johannes Geyer, 2008. "Documentation of the Tax-Benefit Microsimulation Model STSM: Version 2008," Data Documentation 31, DIW Berlin, German Institute for Economic Research.
    5. Christian Pfarr & Udo Schneider, 2011. "Anreizeffekte und Angebotsinduzierung im Rahmen der Riester‐Rente: Eine empirische Analyse geschlechts‐ und sozialisationsbedingter Unterschiede," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 12(1), pages 27-46, February.
    6. Joulfaian, David & Richardson, David, 2001. "Who Takes Advantage of Tax-Deferred Savings Programs? Evidence From Federal Income Tax Data," National Tax Journal, National Tax Association;National Tax Journal, vol. 54(3), pages 669-688, September.
    7. Eric M. Engen & William G. Gale & John Karl Scholz, 1996. "The Illusory Effects of Saving Incentives on Saving," Journal of Economic Perspectives, American Economic Association, vol. 10(4), pages 113-138, Fall.
    8. Joulfaian, David & Richardson, David, 2001. "Who Takes Advantage of Tax-Deferred Savings Programs? Evidence from Federal Income Tax Data," National Tax Journal, National Tax Association, vol. 54(n. 3), pages 669-88, September.
    9. Gert G. Wagner & Joachim R. Frick & Jürgen Schupp, 2007. "The German Socio-Economic Panel Study (SOEP) – Scope, Evolution and Enhancements," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 127(1), pages 139-169.
    10. Coppola, Michela & Reil-Held, Anette, 2009. "Dynamik der Riester-Rente: Ergebnisse aus SAVE 2003 bis 2008," MEA discussion paper series 09195, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ihle, Dorothee, 2017. "Quantile treatment effects of Riester participation on wealth," CAWM Discussion Papers 96, University of Münster, Münster Center for Economic Policy (MEP).
    2. Johannes König & Carsten Schröder, 2018. "Inequality-minimization with a given public budget," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 16(4), pages 607-629, December.
    3. Bönke, Timm & Kemptner, Daniel & Lüthen, Holger, 2018. "Effectiveness of early retirement disincentives: Individual welfare, distributional and fiscal implications," Labour Economics, Elsevier, vol. 51(C), pages 25-37.
    4. Dolls, Mathias & Doerrenberg, Philipp & Peichl, Andreas & Stichnoth, Holger, 2018. "Do retirement savings increase in response to information about retirement and expected pensions?," Journal of Public Economics, Elsevier, vol. 158(C), pages 168-179.
    5. Bönke, Timm & Grabka, Markus M. & Schröder, Carsten & Wolff, Edward N., 2020. "A Head-to-Head Comparison of Augmented Wealth in Germany and the United States," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 122(3), pages 1140-1180.
    6. Dolls, Mathias & Doerrenberg, Philipp & Peichl, Andreas & Stichnoth, Holger, 2019. "Reprint of: Do retirement savings increase in response to information about retirement and expected pensions?," Journal of Public Economics, Elsevier, vol. 171(C), pages 105-116.
    7. Salvador Barrios & Flavia Coda Moscarola & Francesco Figari & Luca Gandullia, 2020. "Size and distributional pattern of pension-related tax expenditures in European countries," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 27(5), pages 1287-1320, October.
    8. Mathias Dolls & Philipp Doerrenberg & Andreas Peichl & Holger Stichnoth, 2016. "Do Savings Increase in Response to Salient Information about Retirement and Expected Pensions?," NBER Working Papers 22684, National Bureau of Economic Research, Inc.
    9. Sylwia Pieńkowska-Kamieniecka & Damian Walczak & Anna Bera, 2019. "Income and Social Determinants of Old-Age Savings: Evidence from Poland," Academic Journal of Interdisciplinary Studies, Richtmann Publishing Ltd, vol. 8, November.
    10. 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).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Timm Bönke & Markus M. Grabka & Carsten Schröder & Edward N. Wolff & Lennard Zyska, 2019. "The Joint Distribution of Net Worth and Pension Wealth in Germany," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 65(4), pages 834-871, December.
    2. Gary V. Engelhardt & Anil Kumar, 2007. "Employer Matching and 401(k) Saving: Evidence from the Health and Retirement Study," NBER Chapters, in: Public Policy and Retirement, Trans-Atlantic Public Economics Seminar (TAPES), pages 1920-1943, National Bureau of Economic Research, Inc.
    3. Bradley T. Heim & Ithai Z. Lurie, 2014. "Taxes, Income, And Retirement Savings: Differences By Permanent And Transitory Income," Contemporary Economic Policy, Western Economic Association International, vol. 32(3), pages 592-617, July.
    4. Anson T. Y. Ho & Jie Zhou, 2016. "Housing and Tax-Deferred Retirement Accounts," Staff Working Papers 16-24, Bank of Canada.
    5. Michael Sherraden & Mark Schreiner & Sondra Beverly, 2003. "Income, Institutions, and Saving Performance in Individual Development Accounts," Economic Development Quarterly, , vol. 17(1), pages 95-112, February.
    6. Bettina Lamla, 2013. "Family background and the decision to provide for old age: a siblings approach," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 40(3), pages 483-504, August.
    7. Zhou, Jie, 2009. "The asset location puzzle: Taxes matter," Journal of Economic Dynamics and Control, Elsevier, vol. 33(4), pages 955-969, April.
    8. Christoph Metzger, 2017. "Who is saving privately for retirement and how much? New evidence for Germany," International Review of Applied Economics, Taylor & Francis Journals, vol. 31(6), pages 811-831, November.
    9. Metzger, Christoph, 2018. "Intra-household allocation of non-mandatory retirement savings," The Journal of the Economics of Ageing, Elsevier, vol. 12(C), pages 77-87.
    10. Ihle, Dorothee, 2017. "Quantile treatment effects of Riester participation on wealth," CAWM Discussion Papers 96, University of Münster, Münster Center for Economic Policy (MEP).
    11. André Decoster & Peter Haan, 2015. "Empirical welfare analysis with preference heterogeneity," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 22(2), pages 224-251, April.
    12. Zhou, Jie, 2009. "The effects of employer matching and income risk in 401(k) plans," Economic Modelling, Elsevier, vol. 26(6), pages 1193-1200, November.
    13. Bucher-Koenen, Tabea, 2011. "Financial Literacy, Riester Pensions, and Other Private Old Age Provision in Germany," MEA discussion paper series 11250, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
    14. Frank Fossen & Daniela Glocker, 2011. "Expected future earnings, taxation, and university enrollment," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 18(6), pages 688-723, December.
    15. Matthew S. Rutledge & April Yanyuan Wu & Francis M. Vitagliano, "undated". "Do Tax Incentives Increase 401 (K) Retirement Saving? Evidence from the Adoption of Catch-Up Contributions," Mathematica Policy Research Reports 9e3f2369237e4d798025ac66e, Mathematica Policy Research.
    16. repec:mea:meawpa:12261 is not listed on IDEAS
    17. Johannes Geyer, 2011. "The Effect of Health and Employment Risks on Precautionary Savings," SOEPpapers on Multidisciplinary Panel Data Research 408, DIW Berlin, The German Socio-Economic Panel (SOEP).
    18. Frank M. Fossen & Daniela Glocker, 2009. "Expected Future Earnings, Taxation, and University Enrollment: A Microeconometric Model with Uncertainty," Discussion Papers of DIW Berlin 934, DIW Berlin, German Institute for Economic Research.
    19. Lamla, Bettina, 2012. "Family background, informal networks and the decision to provide for old age: A siblings approach," MEA discussion paper series 201210, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
    20. Edwin Fourrier-Nicolai, 2020. "How Family Transfers Crowd-out Social Assistance in Germany," AMSE Working Papers 2023, Aix-Marseille School of Economics, France.
    21. Börsch-Supan, Axel & Bucher-Koenen, Tabea & Goll, Nicolas & Maier, Christina, 2016. "15 Jahre Riester - eine Bilanz," Working Papers 12/2016, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung.

    More about this item

    Keywords

    saving subsidies; retirement plans; income distribution;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:fubsbe:201518. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/fwfubde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.