Subsidies vs. Nudges: Which Policies Increase Saving the Most?
The brief’s key findings are:
- To encourage retirement saving, policymakers use two types of tools: tax subsidies and automatic contributions.
- Both tools are effective at increasing retirement saving, but such increases could simply be offset by a reduction in a household’s non-retirement saving.
- A recent study, using Danish data, addresses this issue:
- A revision in the Danish tax subsidy led to a change in retirement saving, but it was almost fully offset by a change in non-retirement saving.
- In contrast, automatic contributions boosted retirement saving with only a small impact on non-retirement saving.