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Pensions in the U.S. Economy

  • Economics


Pension Funding and Saving This PDF is a selection from an out-of-print volume from the National Bureau of Economic Research Volume Title: Pensions in the U.S. Economy Volume Author/Editor: Zvi Bodie, John B. Shoven, and David A. Wise, eds. Volume Publisher: University of Chicago Press Volume ISBN: 0-226-06285-6 Volume URL: Publication Date: 1988 Chapter Title: Pension Funding and Saving Chapter Author: B. Douglas Bernheim, John B. Shoven Chapter URL: Chapter pages in book: (p. 85 - 114) 3 Pension Funding and Saving B. Douglas Bernheim and John B. Shoven The private saving rate in the United States in 1984 has to be considered disappointing. After the enactment of a large number of policies to make investment/saving more rewarding (such as liberalized Individual Retirement Accounts and Keogh Plans, the special tax treatment of some reinvested dividends, capital gains taxes which have been reduced twice in the past six years, and certainly increased investment incen- tives at the corporate level), the preliminary Bureau of Economic Anal- ysis (BEA) estimate for the 1984 personal saving rate is 6.1 percent of disposable personal income. This is lower than the average personal saving rate in the 1970s of 7.3 percent, and only imperceptably better than the 6.0 percent of the first four years of this decade. With all of these incentives, plus a robust economy and record high real interest rates, why was the personal saving rate so low? We are not going to attempt to answer this general question here. Rather, we suggest that personal saving needs to be examined in a disaggregated manner. Some of the policies just mentioned do not really provide incentives to save at the margin, but only serve to channel the existing quantity of saving B. Douglas Bernheim is an associate professor of economics at Stanford University and is a faculty research fellow of the National Bureau of Econom

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