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Can fiscal incentives to saving alleviate looming old-age poverty?

Published online by Cambridge University Press:  05 October 2023

Joanna Tyrowicz Open the ORCID record for Joanna Tyrowicz [Opens in a new window] ,
Krzysztof Makarski  and
Artur Rutkowski
Joanna Tyrowicz*
Affiliation:
University of Regensburg, University of Warsaw, FAME|GRAPE, and IZA, Warsaw, Poland
Krzysztof Makarski
Affiliation:
FAME|GRAPE, and SGH Warsaw School of Economics, Warsaw, Poland
Artur Rutkowski
Affiliation:
FAME|GRAPE, Warsaw, Poland
*
Corresponding author: Joanna Tyrowicz; Email: j.tyrowicz@uw.edu.pl
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Abstract

We develop a general equilibrium overlapping generations framework with incompletely rational individuals to study old-age saving incentives. Such incentives are used worldwide to help achieve the high savings rate required to sustain sufficient consumption in old age. We show that they raise the welfare of financially illiterate individuals and those with a high degree of time inconsistency. They also reduce the incidence of poverty in old age. We further quantify the fiscal cost, crowd-out, and ability to target the transfers to individuals who need the most. Given the high prevalence of these schemes, our paper has broad policy implications.

Keywords

incomplete rationalityold-age povertysaving incentiveswelfare effectsH31H55I38
Type
Article
Information
Journal of Pension Economics & Finance , First View , pp. 1 - 25
Copyright
Copyright © The Author(s), 2023. Published by Cambridge University Press

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