Date of Degree
PhD (Doctor of Philosophy)
Gustavo J. Ventura
In this dissertation, I develop a framework to study the effects of tax-deferred saving accounts on the aggregate economy. I incorporate tax-deferred saving accounts in a theoretical model of household's life-cycle decisions, which is then linked to the real world data by calibration. I study the effects of tax-deferred saving accounts on the aggregate savings and the aggregate output, and further analyze their impacts of different policy changes.
In the first chapter, I present the important features of tax-deferred saving accounts in the U.S. and their institutional changes over time. I highlight the differences between IRA and 401(k) on their contribution limits and household's eligibility. While IRA has a lower contribution limit and is available to all households, 401(k) has a much higher contribution limit but is only accessible by a fraction of households.
In the second chapter, I present an overlapping-generations model to capture the effects of tax-deferred saving accounts in a general equilibrium framework. There are four key aspects to the model: first, households can save in both ordinary saving account and tax-deferred saving account. Second, there is a nonlinear progressive income tax system. Third, households are heterogeneous in their labor productivity and 401(k) eligibility. Fourth, households decide consumption, savings and labor supply endogenously. The model is calibrated to the US economy in 2000, with the distribution of 401(k) eligibility being an endogenous outcome that matches the data reported in Survey of Income and Program Participation (SIPP) in 2001.
In the third chapter, I study the quantitative effects of tax-deferred saving accounts on the aggregate economy and investigate their policy implications. Specifically, I estimate the macroeconomic impacts of eliminating tax-deferred saving accounts from the economy. To highlight the role played by the heterogeneity of 401(k) eligibility, I conduct a quantitative exercise that provide universal 401(k) eligibility to all households. In these experiments, I maintain government revenue neutrality by introducing a new proportional income tax (subsidy) that has the same effects as a upward (downward) shift of all marginal tax rates in the US income tax schedule. Since the institutional settings of tax-deferred saving accounts essentially provide consumption tax treatments on households retirement savings, I further explore the implications of tax-deferred saving accounts for a proportional consumption tax reform. Results from this study indicate that tax-deferred saving accounts have significant impacts on the aggregate economy and demonstrate that these accounts substantially reduce the impacts of a consumption tax reform.
Copyright 2011 Anson Tai Yat Ho
Ho, Anson Tai Yat. "On the effects of tax-deferred saving accounts." doctoral dissertation, University of Iowa, 2011.