Tax subsidies and household saving: Evidence from Canada

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Abstract

Targeted tax-based saving incentives can be a powerful tool for promoting household and national saving. This study examines the effect of the cancellation of the Registered Home Ownership Savings Plan (RHOSP), a Canadian tax-subsidized saving program, on household saving. The cancellation provides exogenous variation in eligibility for the subsidy that is uncorrelated with household-specific heterogeneity in saving behavior. The empirical analysis suggests that the subsidy had a substantial impact on saving: each dollar contributed to the program represented 56-93 and 20-57 cents of new household and national saving, respectively.

Original languageEnglish (US)
Pages (from-to)1237-1268
Number of pages32
JournalQuarterly Journal of Economics
Volume111
Issue number4
StatePublished - Nov 1996
Externally publishedYes

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ASJC Scopus subject areas

  • Economics and Econometrics

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