The Freedom Center and Fall 2022 FC Talks series presents Gylfi Zoega for a virtual presentation titled “Does Mandatory Saving Crowd Out Voluntary Saving? Evidence from a Pension Reform.”

Abstract: Recently, mandatory pension contributions in the private sector in Iceland were increased substantially while remaining unchanged in the public sector. This constituted a large natural experiment. We study the effects of this experiment on households’ voluntary saving using administrative micro data with comprehensive third-party reported information on taxpayers’ income, assets, and debt for all taxpayers in the country. Using difference-in-differences, we find that households do not reduce voluntary saving when faced with a rise in mandatory saving. Our results are confirmed by the finding that workers who move between the public and the private sector, which have different mandatory saving rates, do not change their voluntary saving behavior. Our survey evidence suggests that these findings may be explained by widespread ignorance about the pension system.

Biography: Gylfi Zoega received his first degree at the University of Iceland and a PhD in economics from Columbia University in 1993. He is Professor of Economics at the University of Iceland and Birkbeck College, London, since 1993 and an external member of the Monetary Policy Committee of the Central Bank of Iceland. He has followed the financial crisis in Iceland and taken part in the recovery effort for the past ten years. In addition, he has written a number of academic papers on financial turbulence.

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Kaveh Pourvand