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Tax Incentives for Retirement Savings: Macro and Welfare Effects in an OLG-GE Model with Liquidity Constraints and Heterogeneous Consumers

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  • Rodrigo Cifuentes

Abstract

This paper uses an Overlapping Generations-General Equilibrium model to study the impact of the introduction of tax incentives to voluntary savings for retirement in Chile. The paper analyzes the macro impact of the reform, driven mainly by its effect on savings and capital accumulation, and its effect on welfare. A setting with heterogeneous consumers is considered where agents differ in their income levels, and therefore on the relevance that tax-incentives have for them. Both the transition and the final steady state are analyzed. The heterogeneity modeled allows unveiling important distributive effects of the reform, in particular during the transition to the new steady state.

Suggested Citation

  • Rodrigo Cifuentes, 2003. "Tax Incentives for Retirement Savings: Macro and Welfare Effects in an OLG-GE Model with Liquidity Constraints and Heterogeneous Consumers," Working Papers Central Bank of Chile 242, Central Bank of Chile.
    • Handle: RePEc:chb:bcchwp:242
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    References listed on IDEAS

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    1. Osvaldo Larrañaga & Ricardo Paredes, 1999. "Unemployment and Wages in Chile: A Dynamic Perspective Using Synthetic Cohorts," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 36(109), pages 929-946.
    2. James J. Choi & David Laibson & Brigitte C. Madrian & Andrew Metrick, 2001. "Defined Contribution Pensions: Plan Rules, Participant Decisions, and the Path of Least Resistance," NBER Working Papers 8655, National Bureau of Economic Research, Inc.
    3. Valdés-Prieto,Salvador (ed.), 1997. "The Economics of Pensions," Cambridge Books, Cambridge University Press, number 9780521552301, October.
    4. Rodrigo Cifuentes, 2000. "How Does Pension Reform Affect Savings and Welfare," Working Papers Central Bank of Chile 80, Central Bank of Chile.
    5. Andrea Butelmann & Francisco Gallego, 2001. "Household Saving in Chile (1988 and 1997): Testing the Life Cycle Hypothesis," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 38(113), pages 3-48.
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