Tax Subsidies and Household Saving: Evidence from Canada

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...

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Bibliographic Details
Published in:The Quarterly journal of economics 1996-11, Vol.111 (4), p.1237-1268
Main Author: Engelhardt, Gary V.
Format: Article
Language:English
Subjects:
Economic theory
Estimated taxes
Government subsidies
Home ownership
Household saving
Households
Income taxes
Marginal tax rate
Savings
Savings motives
Savings plans
Statistical analysis
Studies
Subsidies
Tax benefits
Tax incentives
Tax subsidies
Taxation
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Summary: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 householdspecific 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.
ISSN:0033-5533
1531-4650
DOI:10.2307/2946714