Tax Policy, the Rate of Return, and Savings

49 Pages Posted: 25 May 2006 Last revised: 22 Sep 2010

See all articles by Lawrence H. Summers

Lawrence H. Summers

Harvard University; National Bureau of Economic Research (NBER); Harvard University - Harvard Kennedy School (HKS)

Date Written: September 1982

Abstract

The theoretical and empirical results in this paper make a strong prima facie case for the proposition that increases in the after tax rate of return caused by tax policy are likely to bring forth significant increases in saving. Theoretical analysis using a variety of standard models tends to suggest that the aggregate response to savings incentives is likely to be substantial. It is argued that the existing empirical evidence sheds little light on the question. Empirical analyses are then conducted using three alternative approaches. All three confirm the hypothesis of a significant positive response of savings to changes in the rate of return.

Suggested Citation

Summers, Lawrence H., Tax Policy, the Rate of Return, and Savings (September 1982). NBER Working Paper No. w0995. Available at SSRN: https://ssrn.com/abstract=226912

Lawrence H. Summers (Contact Author)

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National Bureau of Economic Research (NBER)

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Harvard University - Harvard Kennedy School (HKS) ( email )

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