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Evaluating the impact on saving of tax-favored retirement plans*

Published online by Cambridge University Press:  23 September 2013

MONICA PAIELLA  and
ANDREA TISENO
MONICA PAIELLA
Affiliation:
Department of Business and Economic Studies, University of Naples Parthenope, Via General Parisi 13, Naples 80133, Italy (e-mail: monica.paiella@uniparthenope.it)
ANDREA TISENO
Affiliation:
Research Department – SCP, Banca d'Italia, Via Nazionale 91, Rome 00184, Italy (e-mail: andrea.tiseno@bancaditalia.it)
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Abstract

This paper exploits a recent reform of private pension schemes in Italy to identify the impact on household saving of tax-favored retirement saving plans. 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 the pension fund legislation had a strong effect on the allocation of saving and triggered substantial substitution of non-tax-favored non-retirement wealth for tax-favored pension funds. In contrast, we find that it had little, if any effect on household saving flows. Our findings also suggest that the provision of ‘closed’ pension funds might significantly affect the decision to invest in private retirement schemes.

Keywords

H31D14D12Household savingsaver heterogeneitysubstitution across assetspension funds and social security reform
Type
Articles
Information
Journal of Pension Economics & Finance , Volume 13 , Issue 1 , January 2014 , pp. 62 - 87
Copyright
Copyright © Cambridge University Press 2013 

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Footnotes

*

We would like to thank E. Gaiotti, G. Grande, L. Guiso, T. Jappelli, M. Manacorda, L. Pistaferri, F. Schivardi and F. Panetta and several seminar and conference participants for helpful comments and conversations. The views expressed are those of the authors and do not necessarily reflect those of the Bank of Italy.

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