Chetty et al. Flashcards
(20 cards)
What are the three areas of exploration condcuted by this paper?
(1) The impact of automatic contributions
(2) Studying the effects of subsidies for retirement savings
(3) Investigating heterogeneity in responses across individuals
How did they look to study the effects of subsidies for retirement savings?
They used a difference in difference design
Also looked to find the following crowd out measures:
- The degree in shifting between different pension accounts
- The degree in shifting from pension accounts to taxable savings
How did they isolate the impact of defined contribution plans as well as the government imposed MSP?
(1) Used event studies for the impact of DC plans
(2) Used a regression discontinuity design for the MSP
How did they look to investigae the heterogeneity in responses across individuals?
Used the difference between the two policies to determine the share of active versus passive savers
How did they formally estimate the fraction of active savers?
They did so from the rates of pass through as it relates to pension contributions
What data did they use?
Merges data from several administrative registers e.g. income tax register, labour market research
Excludes those under 18 or above age of 60
Also excludes observations with self-employment income.
Defines a (noisy) measure of gross taxable saving as the change in the individual’s taxable asset holdings.
What are three limitations that measures of taxable saving suffers from?
(1) Omits home equity wealth
(2) Definition of savings does not account for other durables e.g. cars or appliances
(3) Wealth data excludes some assets such as cash holdings outside of bank accounts etc.
Do they look at the individual or the HH?
They look to the individual rather than the HH as Denmark’s key incentive operate at the individual level.
How did they measure the impact of automatic contributions
They exploited situations where individuals switched employers and experienced exogenous changes in automatic employer pension contributions.
What % of indiviuduals were found to be active savers (in response to employer pension changes)?
6.1% of individuals are active savers who adjust their behaviour in response to employer pension changes.
How much did total saving increase by for every 1Dkr contributed in the case of automatic contributions?
When individuals moved to firms with higher automatic pension contributions, their total saving increased by about 80 cents for every 1 Danish krone contributed.
Indicates little offset or “crowd-out” from other savings.
How did they measure the impact of the goverment mandatory savings plan?
They used a regression discontinuity design.
Note that the identification assumption underlying equation (6) is that unobserved determinants of savings rates evolve smoothly around the MSP eligibility cut off.
What was the estimated pass through rate of mandated savings to total pensions?
Found to be 0.88 using the regression discontinuity design.
How did the subsidy reduction impact the marginal propensity to save in capital pensions?
Subsidy reduction reduced the marginal propensity to save in capital pensions by 0.021/0.025 = 84%
What happened to those just above the top tax cut off for the subsidy reduction, directly affected by it?
A notable fraction of people reduced their contributions by 100% (i.e., exited capital pensions completely) after the subsidy was reduced. (15.9%)
The aggregate effect of the subsidy reduction masks the fact that most people did not respond at all, while a minority made large, discrete changes.
What percentage do individuals shift from capital pension to annuity pensions insyead upon the reduction of the subsidy?
Individuals shift 0.57 that they would have put in capital pension accounts into annuity pensions instead
Can also estimate crowd out using changes in the the MPS in annuity accounts instead of mean contributions levels (0.47)
What was the impact of the subsidy on total saving (aggregate)
The subsidy has a small impact on total saving because it is an inframarginal transfer that has no effect on the behaviour of passive savers
The active savers who respond to the subsidy exhibit a low interest elasticity of saving
Are new contributors more sensitive to changes in relative subsidies for capital versus pensions in 1999?
Reduction - lead to decrease in probabilitiy of those that preveious contributed to the capita pension by 15% points.
Byt was 23% points for new contributors.
What did they find regarding the extensive margin substitution relating to the reduction in susidies following the 1999 reform?
Roughly 20% of individuals who adjust their pensions in every year respond to the 1999 reform by existing capital pensions altogether.
What was the rate of passive savers and how were they identified?
85% of individuals are passive individuals who save more when induced to do so by an automatic contribution but do not respond at all to price subsidies
