The Effects of the Introduction of Tax Incentives on Retirement Savings

49 Pages Posted: 5 Jul 2007

See all articles by Juan Ayuso

Juan Ayuso

Banco de España

Juan F. Jimeno

Banco de España - Research Department; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Ernesto Villanueva

Banco de España - Research Department

Date Written: July 4, 2007

Abstract

This paper uses a Spanish panel of tax returns and another on household expenditure during the period 1985-1991 to examine the incidence of the introduction in 1988 of tax incentives to retirement savings on contributions to pension funds and on savings. We first identify the population cohorts who most used these incentives. Then we use data on the evolution of consumption of these cohorts to find that there is substantial heterogeneity in the response of household saving to tax incentives. Most contributions to pension funds are by older/high income individuals. While the overall amount of new saving we estimate is limited (at most 25 cents per euro contributed on average), saving responses differ substantially across age groups. In particular, we document very small consumption drops among the group of households between 56 and 65 years of age, the group that most actively contributed to the plan, while we find instead a larger decrease in consumption expenditures of the group of households between 46 and 55 years of age.

Keywords: pension funds, tax incentives, savings

JEL Classification: D14, H24, H55

Suggested Citation

Ayuso, Juan and Jimeno, Juan F. and Villanueva, Ernesto, The Effects of the Introduction of Tax Incentives on Retirement Savings (July 4, 2007). Banco de España Research Paper No. WP-0724, Available at SSRN: https://ssrn.com/abstract=998219 or http://dx.doi.org/10.2139/ssrn.998219

Juan Ayuso (Contact Author)

Banco de España ( email )

Alcala 50
Servicio de Estudios
28014 Madrid
Spain
+34 91 338 5735 (Phone)
+34 91 338 5624 (Fax)

Juan F. Jimeno

Banco de España - Research Department ( email )

Alcala 48
28014 Madrid
Spain

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Ernesto Villanueva

Banco de España - Research Department ( email )

Alcala 50
28014 Madrid
Spain

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