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Savings Incentives for Low- and Moderate-Income Families in the United States: Why is the Saver's Credit Not More Effective?

Author

Listed:
  • Esther Duflo
  • William Gale
  • Jeffrey Liebman
  • Peter Orszag
  • Emmanuel Saez

Abstract

This paper uses data from the largest tax preparer in the United States to estimate the impact of the "saver's credit," a US federal program providing financial incentives to encourage retirement savings, on the decision to contribute to an IRA. It finds significant, but very modest, effects. This is contrasted with results from a field experiment showing much larger impacts of clearly presented matching incentives. Various explanations are discussed for why the saver's credit is not more effective. (JEL: H00, H31, C93, D14) (c) 2007 by the European Economic Association.

Suggested Citation

  • Esther Duflo & William Gale & Jeffrey Liebman & Peter Orszag & Emmanuel Saez, 2007. "Savings Incentives for Low- and Moderate-Income Families in the United States: Why is the Saver's Credit Not More Effective?," Journal of the European Economic Association, MIT Press, vol. 5(2-3), pages 647-661, 04-05.
    • Handle: RePEc:tpr:jeurec:v:5:y:2007:i:2-3:p:647-661
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    Citations

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    Cited by:

    1. Jindapon, Paan & Sujarittanonta, Pacharasut & Viriyavipart, Ajalavat, 2022. "Prize-linked savings games: Theory and experiment," Games and Economic Behavior, Elsevier, vol. 133(C), pages 202-229.
    2. Mason, Lisa Reyes & Nam, Yunju & Clancy, Margaret & Kim, Youngmi & Loke, Vernon, 2010. "Child Development Accounts and saving for children's future: Do financial incentives matter?," Children and Youth Services Review, Elsevier, vol. 32(11), pages 1570-1576, November.
    3. Kondratjeva, Olga & Roll, Stephen P. & Bufe, Sam & Grinstein-Weiss, Michal, 2021. "Using financial tips to guide debt repayment: Experimental evidence from low- and moderate-income tax filers," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 90(C).
    4. Corneo, Giacomo & Keese, Matthias & Schröder, Carsten, 2010. "The Effect of Saving Subsidies on Household Saving – Evidence from Germanys," Ruhr Economic Papers 170, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    5. Silvia Jordan & Corinna Treisch, 2010. "The perception of tax concessions in retirement savings decisions," Qualitative Research in Financial Markets, Emerald Group Publishing Limited, vol. 2(3), pages 157-184, October.
    6. repec:zbw:rwirep:0170 is not listed on IDEAS
    7. Atalay, Kadir & Bakhtiar, Fayzan & Cheung, Stephen & Slonim, Robert, 2014. "Savings and prize-linked savings accounts," Journal of Economic Behavior & Organization, Elsevier, vol. 107(PA), pages 86-106.
    8. Balázs Király & András Simonovits, 2019. "Learning to save in a voluntary pension system: toward an agent-based model," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 14(1), pages 121-145, March.
    9. Simonovits, András & Király, Balázs, 2016. "Megtakarítás és adózás egy önkéntes nyugdíjrendszerben - ágensalapú modellezés [Saving and taxation in a voluntary pension system: Towards an agent-based model]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(5), pages 473-500.
    10. Balazs Kiraly & Andras Simonovits, 2016. "Saving and taxation in a voluntary pension system: Toward an agent-based model," CERS-IE WORKING PAPERS 1606, Institute of Economics, Centre for Economic and Regional Studies.
    11. World Bank, 2009. "Banking the Poor : Measuring Banking Access in 54 Economies," World Bank Publications - Books, The World Bank Group, number 13804.
    12. J. Michael Collins & Carly Urban, 2016. "The Role Of Information On Retirement Planning: Evidence From A Field Study," Economic Inquiry, Western Economic Association International, vol. 54(4), pages 1860-1872, October.
    13. Chan, Marc K. & Polidano, Cain & Vu, Ha & Wilkins, Roger & Carter, Andrew & To, Hang, 2020. "How Effective are Matching Schemes in Enticing Low-income Earners to Save More for Retirement? Evidence from a National Scheme," IZA Discussion Papers 13939, Institute of Labor Economics (IZA).
    14. Rajat Deb & Prasenjit Deb & Sujit Majumder & Sourav Chakraborty & Kiran Sankar Chakraborty, 2019. "Answering Savings Puzzle About Small Saving Schemes and Mutual Funds: Evidence from Tripura," Metamorphosis: A Journal of Management Research, , vol. 18(1), pages 7-19, June.
    15. Sadettin Haluk Citci & Halit Yanikkaya, 2023. "The Impacts of Matching Contributions on Retirement Savings: Evidence from a Quasi-Natural Experiment in Turkey," Working Papers 2022-02, Gebze Technical University, Department of Economics.
    16. Ramnath, Shanthi, 2013. "Taxpayers' responses to tax-based incentives for retirement savings: Evidence from the Saver's Credit notch," Journal of Public Economics, Elsevier, vol. 101(C), pages 77-93.
    17. Giacomo Corneo & Matthias Keese & Carsten Schröder, 2010. "The Eff ect of Saving Subsidies on Household Saving – Evidence from Germanys," Ruhr Economic Papers 0170, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.

    More about this item

    JEL classification:

    • H00 - Public Economics - - General - - - General
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance

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