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NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Working Papers by Torben Nielsen

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Working Papers

November 2012Active vs. Passive Decisions and Crowdout in Retirement Savings Accounts: Evidence from Denmark
with Raj Chetty, John N. Friedman, Soren Leth-Petersen, Tore Olsen: w18565
Using 41 million observations on savings for the population of Denmark, we show that the impacts of retirement savings policies on wealth accumulation depend on whether they change savings rates by active or passive choice. Subsidies for retirement accounts, which rely upon individuals to take an action to raise savings, primarily induce individuals to shift assets from taxable accounts to retirement accounts. We estimate that each $1 of government expenditure on subsidies increases total saving by only 1 cent. In contrast, policies that raise retirement contributions if individuals take no action – such as automatic employer contributions to retirement accounts – increase wealth accumulation substantially. We estimate that approximately 15% of individuals are “active savers” who respond t...

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