Skip to Content

Search: {{$root.lsaSearchQuery.q}}, Page {{$}}

Public Finance: Optimal Paternalistic Savings Policies

Christian Moser, Columbia University
Monday, November 29, 2021
4:00-5:00 PM
We study optimal savings policies when there is a dual concern about undersaving for retirement and income inequality. Agents differ in present bias and earnings ability, both unobservable to a planner with paternalistic and redistributive motives. We characterize the solution to this two-dimensional screening problem and provide a decentralization using realistic policy instruments: mandatory savings at low incomes but a choice between subsidized savings vehicles at high incomes--resembling Social Security, 401(k) and IRA accounts in the US. Offering more savings choice at higher incomes facilitates redistribution. To solve large-scale versions of this problem numerically, we propose a general, computationally stable, and efficient active-set algorithm. Relative to the current US retirement system, we find significant welfare gains from increasing mandatory savings and limiting savings choice at low incomes.
Building: Off Campus Location
Location: Virtual
Event Type: Workshop / Seminar
Tags: Economics, seminar
Source: Happening @ Michigan from Department of Economics, Public Finance