TY - JOUR AU - Feenberg,Daniel AU - Skinner,Jonathan TI - Sources of IRA Saving JF - National Bureau of Economic Research Working Paper Series VL - No. 2845 PY - 1989 Y2 - February 1989 UR - http://www.nber.org/papers/w2845 L1 - http://www.nber.org/papers/w2845.pdf N1 - Author contact info: Daniel R. Feenberg National Bureau of Economic Research 1050 Massachusetts Avenue Cambridge, MA 02138 Tel: 617/588-0343 Fax: 617/868-2742 E-Mail: feenberg@nber.org Jonathan S. Skinner Department of Economics 6106 Rockefeller Hall Dartmouth College Hanover, NH 03755 Tel: 603/646-2535 Fax: 603/646-2122 E-Mail: jonathan.skinner@dartmouth.edu M1 - published as Daniel Feenberg, Jonathan Skinner. "Sources of IRA Saving," in Lawrence H. Summers, editor, "Tax Policy and the Economy, Volume 3" MIT Press (1989) M2 - featured in NBER digest on 1989-05-01 AB - To address the question of whether IRA5 contribute to capital formation, we use the IRS/University of Michigan taxpayer sample for income tax returns during 1980-84. By matching families across a five-year period, we can estimate the dynamic interactions of IRA purchases and other types of saving, correct for individual differences, and test whether IRA purchases are in part offset by other (net) asset sales. The "reshuffling" hypothesis implies that taxpayers who enroll in IRAs should, over time, experience a drop in net taxable interest and dividend income as their taxable assets (or new loans) are used to purchase IRAs. Conversely, the "new saving" view of IRAs implies that taxable interest and dividend income should be unaffected by IRA purchases. We find little or no evidence which favors the view that IRAs are funded by cashing out existing taxable assets. In fact, individuals who purchased IRAs in each year between 1982-84 increased their asset holdings by more than those who did not purchase IRAs. In one sense, our results strongly confirm the studies by Venti and Wise and Hubbard that IRA saving represents new saving. But shuffling could still occur, albeit on a secondary level: families who are accumulating both taxable assets and IRAs might have accumulated even more taxable assets had IRA5 not been available ER -