Resource title

Individual Retirement Accounts, Self-control and Intergenerational Welfare

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Resource description

The present paper studies the growth and efficiency consequences of tax-favored individual retirement accounts in a general equilibrium overlapping generations model with idiosyncratic lifespan and labor income uncertainty. We distinguish between economies with rational and with hyperbolic consumers and compare the consequences of mandatory and voluntary retirement plans with and without annuitized benefits. While a full taxation of capital income yields the highest efficiency gains in the rational consumer model, annuitization and hyperbolic discounting substantially improve the economic efficiency of IRAs. We also show that annuitization alters the intergenerational welfare consequences of the reform substantially, since it reduces accidental bequests. Finally, even if mandatory saving programs have a clear cost advantage, they are only recommendable if consumers are myopic. individual retirement accounts, annuities, stochastic general equilibrium, hyperbolic consumers

Resource author

Hans Fehr, Christian Habermann

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Resource publish date

Resource language

eng

Resource content type

application/pdf

Resource resource URL

http://hdl.handle.net/10398/7710

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