Working Paper: CEPR ID: DP3881
Authors: Tullio Jappelli; Luigi Pistaferri
Abstract: The Paper reviews the literature on these tax incentives, with special focus on long-term saving, housing, and household liabilities. The Paper addresses several areas of policy intervention: (1) the interest rate effect on personal saving; (2) the effect of tax incentives on long-term mandatory saving programmes; (3) government programmes that target saving for home purchase; (4) government programmes that target health and saving for education; (5) the effect of tax incentives to borrow, rather than to save. For each of these five important issues, the Paper provides empirical evidence on the main characteristics of government programmes, with a special focus on middle-income countries. It also addresses a number of issues that should be of interest to policy-makers. First of all, on which grounds government policy should target some assets rather than others. Second, if tax-sheltered assets and liabilities lead to substitution away from more heavily taxed savings instruments or if they affect the overall level of saving. Finally, if there is any lesson that can be drawn from the experience of developed countries for the design of saving and borrowing incentives in middle-income countries.
Keywords: borrowing; saving; tax incentives
JEL Codes: D91; H20
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Government policies affecting the real interest rate (E43) | Overall level of saving (E21) |
| Tax benefits associated with mortgage interest (G21) | Increased household saving (D14) |
| Tax incentives (H20) | Shift in household portfolios towards borrowing (G51) |
| Tax incentives for long-term mandatory saving programs (H20) | National saving rates (E21) |