When and How to Subsidize Tax-Favored Retirement Accounts?

Andras Simonovits ()
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Andras Simonovits: Institute of Economics - Hungarian Academy of Sciences, Department of Economics - CEU, Mathematical Institute - Budapest University of Technology

No 902, CERS-IE WORKING PAPERS from Institute of Economics, Centre for Economic and Regional Studies

Abstract: When and how to subsidize tax-favored pension accounts? To defend myopic workers against themselves, the government introduces a mandatory system but to help savers, it adds taxfavored retirement accounts. If the mandatory system is progressive, then a proportional voluntary system can beneficially dampen the redistribution. If the mandatory system is proportional, then a progressive voluntary system may raise the old-age consumption of the lower-paid. But if both the mandatory and the voluntary systems are proportional and the ceiling is high (as is the case in Hungary), then the latter does not diminish the tension of the mandatory system.

Keywords: mandatory pensions; tax-favored retirement accounts; voluntary contributions; subsidies (search for similar items in EconPapers)
JEL-codes: D91 H55 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2009-01
New Economics Papers: this item is included in nep-age and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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