Pension taxation, household debt and the real economy

Henrik Yde Andersen ()
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Henrik Yde Andersen: Danmarks Nationalbank, Postal: Langelinie Allé 47, 2100 København Ø

Nationaløkonomisk tidsskrift, 2021, vol. 2021, issue 1, 14

Abstract: This paper reviews findings from the literature about the interplay between pension savings and debt accumulation in households. The first part explains why debt levels in the household sector play a role for macroeconomic developments. The second part presents how pension taxation affects the pace at which households accumulate debt. One recent contribution in this field is Andersen (2018) which provides an empirical analysis on crowding out in retirement accounts. The results show that savers tend to redirect savings from pension accounts towards alternative savings accounts once tax incentives for saving in retirement accounts are reduced. Specifically, 1/3 of savings that was usually placed in taxfavored pension accounts was now used for debt repayment, while 2/3 was placed in other savings accounts. The findings imply that pension taxation may be an important factor when explaining household debt accumulation.

Keywords: Crowding out; retirement savings; household debt (search for similar items in EconPapers)
JEL-codes: D14 D15 E21 H31 (search for similar items in EconPapers)
Date: 2021
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