Template-Type: ReDIF-Paper 1.0
Author-Name:  Hans Fehr
Author-X-Name-First: Hans
Author-X-Name-Last: Fehr

Author-Name:  Christian Habermann
Author-X-Name-First: Christian
Author-X-Name-Last: Habermann

Author-Name:  Fabian Kindermann
Author-X-Name-First: Fabian
Author-X-Name-Last: Kindermann

Title: Tax-Favored Retirement Accounts: Are they Efficient in Increasing Savings and Growth?
Abstract: The present paper aims to quantify the macroeconomic and welfare effects of taxfavored
retirement accounts. Starting from an equilibrium without saving incentives,
we introduce such accounts and compute the new transition path and the resulting
long-run equilibrium. Since our overlapping-generations model comprises a detailed
progressive tax system, borrowing constraints as well as stochastic income risk, we
can compare macroeconomic and liquidity effects, tax distortions and the insurance
properties of the policy reform.
Our simulations indicate that tax-favored retirement accounts as implemented
in many OECD countries will have a significant impact on capital accumulation and
wage growth in the long run, but only yield insignificant aggregate efficiency changes.
While elderly generations are typically hurt by such a reform, young and future
generations benefit. Finally, with respect to the intragenerational redistribution, a
subsidy system that includes direct bonus payments might be preferred to a system
with pure tax deductions.
Length:  29 pages
Creation-Date:  2006-07
File-URL: http://www.bgpe.de/texte/DP/012_habermann2.pdf
File-Format: Application/pdf
File-Function: First version, 2006
Number: 012
Classification-JEL: H55, J26
Keywords: Savings incentives, stochastic general equilibrium model
Handle: RePEc:bav:wpaper:012_kindermann2