Evaluating the impact on saving of tax-favored retirement plans

2014 
This paper exploits a recent reform of private retirement schemes in Italy to identify treatment effects on household saving. The reform was part of the restructuring of the social security system and was aimed at rising private long-term saving by making pension funds more attractive and convenient. We control for unobserved saver heterogeneity and a central focus is on substitution across saving instruments. We find that private pension saving incentives had little, if any effect on household saving. Further, those workers who have experienced the most severe social security cut are not significantly more likely to contribute to pension funds, ceteris paribus. We find, however, that the pension fund legislation had a strong effect on the allocation of saving and triggered substantial substitution of non-taxfavored non-retirement wealth for tax-favored pension funds.
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