The Labour Supply and Savings Effects of Superannuation Tax Changes

14 Pages Posted: 23 Apr 2008

See all articles by John Creedy

John Creedy

University of Melbourne - Department of Economics

Ross S. Guest

Griffith University - School of Accounting and Finance - Gold Coast Campus

Abstract

This paper investigates the effects on labour supply, consumption and savings of a change in the superannuation tax structure, involving the taxation of contributions to a fund, pre-retirement earnings of the fund, and the benefits received from the fund during retirement. The effects on lifetime plans of tax changes are investigated using a simple three-period model in which the final period is retirement. The effects of unanticipated changes, requiring revisions to plans, are examined. Although the partial effects of particular tax changes are unambiguous, the effects of allowing for a government budget constraint mean that it is difficult to predict a priori how labour supply is likely to be affected. However, private savings unambiguously fall.

Suggested Citation

Creedy, John and Guest, Ross, The Labour Supply and Savings Effects of Superannuation Tax Changes. Australian Economic Papers, Vol. 47, Issue 1, pp. 1-14, March 2008. Available at SSRN: https://ssrn.com/abstract=1124172 or http://dx.doi.org/10.1111/j.1467-8454.2008.00332.x

John Creedy (Contact Author)

University of Melbourne - Department of Economics ( email )

Level 5, FBE Building, 111 Barry Street
Parkville, Victoria 3010
Australia
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+61 3 9347 3986 (Fax)

Ross Guest

Griffith University - School of Accounting and Finance - Gold Coast Campus ( email )

PMB 50 Gold Coast Mail Centre
9726 Queensland
Australia

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