Working Paper: NBER ID: w5686
Authors: R. Glenn Hubbard; Jonathan S. Skinner
Abstract: In this paper, we argue that there is more to be learned from recent research on the effectiveness of targeted saving incentives than is suggested by the wide variation in empirical estimates. First, we conclude that characterizations of saving appear to stimulate moderate amounts of new saving. Second, we suggest a cost-benefit approach to ask: What is the incremental gain in capital accumulation per dollar of foregone revenue? We find that for quite conservative measures of the saving impacts of IRAs or 401(k)s, the incremental gains in capital accumulation per dollar of lost revenue are large
Keywords: saving incentives; IRAs; 401(k) plans; capital accumulation; public economics
JEL Codes: H24; D91; E21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| household income and demographics (R20) | effectiveness of saving incentives (D14) |
| psychological factors (D91) | new saving behavior (D14) |
| new saving behavior (D14) | shifts from other forms of saving or consumption (E21) |
| IRAs and 401(k) plans (D14) | new saving behavior (D14) |
| new saving behavior (D14) | capital accumulation (E22) |
| IRAs and 401(k) plans (D14) | capital formation (E22) |