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Taxing the Wealth of the Poor: Evidence from the Danish Old-Age Support Asset Test

Author

Listed:
  • Niels Johannesen
  • Johan Sæverud
  • Emmanuel Saez

Abstract

We document strong behavioral responses to an asset test for an old-age support program in Denmark using comprehensive administrative data. We show that the density distribution of the liquid assets targeted by the test exhibits large but diffuse excess mass below the threshold for the treated group relative to control groups of comparable but ineligible individuals. A cohort analysis exploiting the panel structure suggests that the program reduces liquid assets by 20 percent around the threshold. Analyzing high-frequency bank data on assets and cash withdrawals shows that the excess mass around the threshold largely reflects permanent rather than temporary responses.

Suggested Citation

  • Niels Johannesen & Johan Sæverud & Emmanuel Saez, 2024. "Taxing the Wealth of the Poor: Evidence from the Danish Old-Age Support Asset Test," NBER Working Papers 33189, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:33189
    Note: AG PE
    as

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    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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