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The Crowding-out effect of mandatory labour market pensions schemes on private savings: evidence from
Denmark
Søren Arnberg
Danish Economic Councils
Mikkel Barslund
Danish Economic Councils
Does mandatory pension savings crowd out private voluntary savings?
Relevant for policy makers in two ways:
- does mandatory savings increase total savings?
- macroeconomic implications
Motivation
Pension wealth and saving rates:• King & Dicks-Mireaux (1982), Jappelli (1995), Alessie,
Kapteyn & Klijn (1997), Gale (1998), Euwals (2000)
Pension entitlements and private savings:• Attanasio & Rohwedder (2003), Attanasio & Brugiavini
(2003), Kim & Klump (2008)
Context
Contribution
Provide estimates of the offsetting effect of current mandatory savings on current voluntary savings
Development of the Danish labour market pension system provides a direct route to assess the substitution…
Danish labour market pension schemes
• Part of collective agreements between unions and employers associations
• Mandatory for workers in an agreement area
• Some uncovered parts of the labour market
Contribution Rates for Danish Mandatory Labour Market Pensions
201020082006200420022000199819961994
20
15
10
5
0
Pct.
LO/DA blue-collar workersLO/DA white-collar workers with a short educationSchool TeachersKindergarten TeachersGovernmental workers with a higher education
Differences in implementation
Which parts of the salary are liable for pension contributions?
• Basic salary? Always
• Payments by results? For some groups
Contribution rates
20052004200320022001200019991998199719961995
8
6
4
2
0
Pct.
35 years old45 years old55 years old
CR for labour market pension
20052004200320022001200019991998199719961995
8
6
4
2
0
Pct.
35 years old45 years old55 years old
Model
voluntary savings
mandatory labour market pension savings
yearly earnings
non-contractual wealth
pension wealth
age education interaction term
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51
41
31
2
VitsAPits
ity
Pita 1
Fita 1
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