Do Savers Respond to Tax Incentives? The Case of Retirement Savings

Clément Carbonnier, Alexis Direr and Ihssane Slimani-Houti

Annals of Economics and Statistics, 2014, issue 113-114, 225-256

Abstract: This article exploits a large micro-_le tax return data to test whether savers respond to the presence of tax incentives by contributing more in saving accounts that mandate annuitization at retirement. A frictionless model of demand for annuity is first set, which highlights the phenomenon of bunching of savers around tax thresholds when consumers' budget set is kinked. Using French households income tax data, we do not find any bunching, which is consistent either with the absence of behavioral responsiveness to tax incentives or optimization frictions. We investigate the implications of the second hypothesis and propose an alternative test in which discontinuity in marginal rate of return on the two sides of tax thresholds is exploited. We find that the deduction scheme is effective in boosting the demand for annuity of the richest savers whose marginal tax rate is the highest, especially for the oldest savers (aged 45 and above). In most cases, it fails to raise contributions of younger and less wealthy savers.

Date: 2014
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.jstor.org/stable/10.15609/annaeconstat2009.113-114.225 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:adr:anecst:y:2014:i:113-114:p:225-256

DOI: 10.15609/annaeconstat2009.113-114.225

Access Statistics for this article

Annals of Economics and Statistics is currently edited by Laurent Linnemer

More articles in Annals of Economics and Statistics from GENES Contact information at EDIRC.
Bibliographic data for series maintained by Secretariat General () and Laurent Linnemer ().