Hostname: page-component-cd9895bd7-fscjk Total loading time: 0 Render date: 2024-12-23T13:48:05.820Z Has data issue: false hasContentIssue false
  • English
  • Français

Evaluating the impact on saving of tax-favored retirement plans*

Published online by Cambridge University Press:  23 September 2013

MONICA PAIELLA  and
ANDREA TISENO
MONICA PAIELLA
Affiliation:
Department of Business and Economic Studies, University of Naples Parthenope, Via General Parisi 13, Naples 80133, Italy (e-mail: [email protected])
ANDREA TISENO
Affiliation:
Research Department – SCP, Banca d'Italia, Via Nazionale 91, Rome 00184, Italy (e-mail: [email protected])
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper exploits a recent reform of private pension schemes in Italy to identify the impact on household saving of tax-favored retirement saving plans. The reform was part of the restructuring of the social security system and was aimed at rising private long-term saving by making pension funds more attractive and convenient. We control for unobserved saver heterogeneity and a central focus is on substitution across saving instruments. We find that the pension fund legislation had a strong effect on the allocation of saving and triggered substantial substitution of non-tax-favored non-retirement wealth for tax-favored pension funds. In contrast, we find that it had little, if any effect on household saving flows. Our findings also suggest that the provision of ‘closed’ pension funds might significantly affect the decision to invest in private retirement schemes.

Keywords

H31D14D12Household savingsaver heterogeneitysubstitution across assetspension funds and social security reform
Type
Articles
Information
Journal of Pension Economics & Finance , Volume 13 , Issue 1 , January 2014 , pp. 62 - 87
Copyright
Copyright © Cambridge University Press 2013 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

*

We would like to thank E. Gaiotti, G. Grande, L. Guiso, T. Jappelli, M. Manacorda, L. Pistaferri, F. Schivardi and F. Panetta and several seminar and conference participants for helpful comments and conversations. The views expressed are those of the authors and do not necessarily reflect those of the Bank of Italy.

References

Angrist, J. and Pischke, J. (2009) Mostly Harmless Econometrics: An Empiricist's Companion. Princeton University Press, Princeton, New Jersey 08540.Google Scholar
Attanasio, O. and Brugiavini, A. (2003) Social security and households’ saving. Quarterly Journal of Economics, 118(3): 1075–1120.Google Scholar
Attanasio, O. and DeLeire, T. (2002) The effect of individual retirement accounts on household consumption and national saving. Economic Journal, 112(6): 504–538.CrossRefGoogle Scholar
Auerbach, A. and Slemrod, J. (1997) The economic effects of the tax reform act of 1986. Journal of Economic Literature, 35(2): 589–632.Google Scholar
Bernheim, D. and Scholz, J. K. (1993) Private saving and public policy. In Poterba, J. (ed.), Tax Policy and the Economy, Volume 7. MIT Press, Cambridge, Mass., pp. 73–110.Google Scholar
Blundell, R. and Costa Dias, M. (2002) Alternative Approaches to Evaluation in Empirical Microeconomics, IFS Cemmap Working Paper 10/02.Google Scholar
Bottazzi, R., Jappelli, T. and Padula, M. (2006) Retirement expectations and pension reforms. Journal of Public Economics, 90: 2167–2213.Google Scholar
Bottazzi, R., Jappelli, T. and Padula, M. (2011) The portfolio effect of pension reforms: Evidence from Italy. Journal of Pension Economics and Finance, 1474–7472.Google Scholar
Cesari, R., Grande, G. and Panetta, F. (2008) Supplementary pension schemes in italy: features, development and opportunities for workers. Giornale degli Economisti, e Annali di Economia, 67(1): 21–73.Google Scholar
COVIP Annual report (various years). Available in Italian at: http://www.covip.it/RelazioneAnnuale2004.htm.Google Scholar
Engen, E., Gale, W. and Scholz, J. K. (1994) The Effects of Tax-Based Saving Incentives on Saving and Wealth, NBER Working Paper No. 5759.Google Scholar
Engen, E., Gale, W. and Scholz, J. K. (1996) Do saving incentives work? Brookings Papers on Economic Activity, 1: 85–180.Google Scholar
Gale, W. (1998) The effects of pensions on household wealth: a reevaluation of theory and evidence. Journal of Political Economy, 106(4): 706–723.Google Scholar
Hall, R. (1988) Intertemporal substitution in consumption. Journal of Political Economy, 96(2): 339–357.Google Scholar
Messori, M. (2006) La previdenza complementare in Italia. Bologna: Il Mulino.Google Scholar
Poterba, J., Venti, S. and Wise, D. (1994) Targeted retirement saving and the net worth of elderly Americans. American Economic Review, 84(2): 180–185.Google Scholar
Poterba, J., Venti, S. and Wise, D. (1995) Do 401(k) contributions crowd out other personal saving? Journal of Public Economic, 58: 1–32.Google Scholar
Poterba, J., Venti, S. and Wise, D. (1996) How retirement saving programs increase saving. Journal of Economic Perspectives, 10(4): 91–112.Google Scholar
Poterba, J., Venti, S. and Wise, D. (1997) Personal Retirement Saving Programs and Asset Accumulation: Reconciling the Evidence, NBER Working Paper No. 5599.Google Scholar
Slemrod, J. (1990) The Economic Impact of Tax Reform. In Slemrod, J. (ed.), Do Taxes Matter? The Impact of the Tax Reform Act of 1986. MIT Press, Cambridge, Mass., 1–12.Google Scholar
Stock, J. H. and Yogo, M. (2005) Testing for weak instruments in linear IV regression. In Andrews, D. W. and Stock, J. H. (eds), Identification and Inference for Econometric Models: Essays in Honor of Thomas Rothenberg. Cambridge, Mass: Cambridge University Press, pp. 80–108.CrossRefGoogle Scholar