The influence of decision making costs on the effectiveness of tax incentives to save
Lead Research Organisation:
National Institute of Economic and Social Research
Department Name: National Institute of Economic & Soc Res
Abstract
Abstracts are not currently available in GtR for all funded research. This is normally because the abstract was not required at the time of proposal submission, but may be because it included sensitive information such as personal details.
People |
ORCID iD |
| Justin Van De Ven (Principal Investigator) |
Publications
Van De Ven J
(2017)
SIDD: An adaptable framework for analysing the distributional implications of policy alternatives where savings and employment decisions matter
in Economic Modelling
Van De Ven, J.
(2017)
Exploring the Importance of Incentive Responses for Policy Projections
in International Journal of Microsimulation
Van De Ven, J.
(2017)
Parameterising a detailed dynamic programming model of savings and labour supply using cross-sectional data
in International Journal of Microsimulation
Lucchino P
(2013)
Empirical Analysis of Household Savings Decisions in Context of Uncertainty: A Cross-Sectional Approach
in SSRN Electronic Journal
Lucchino P
(2013)
Modelling the Dynamic Effects of Transfer Policy: The LINDA Policy Analysis Tool
in SSRN Electronic Journal
| Description | This study explores the influence of decision costs on the effectiveness of tax incentives to save. It is structured around two key questions, the first empirical, and the second policy orientated. 1. What is the evidence for decision costs in relation to tax incentivised savings schemes? A model of household savings and investment decisions was created to explore behaviour in relation to pensions and Individual Savings Accounts (ISAs). This model was matched to UK survey data, focussed around the population cross-section observed in 2006/07. In the absence of decision costs, the model suggests that three out of every four individuals who hold no ISA investments would immediately open an ISA account. Allowing for decision costs permits the model to reflect realistic annual rates of ISA take-up, which do not exceed 5% of the population aged 20-60. 2. How do decision costs affect responses to the savings incentives that are offered through ISAs? The model derived in answering the first question was used to explore behavioural responses to ISAs, and how different assumptions about decisions costs influence those responses. The basic model structure implies that most investments made through ISAs are substituted out of other non-pension wealth, rather than the product of new household saving. In this context, decision costs have an important influence on the scale of the investments made through ISAs, and on who enjoys a welfare gain from the scheme. This analysis highlights the potential importance of decision costs when analysing winners and losers of policy reform. |
| Exploitation Route | Our findings in relation to decision costs concerning individual investment decisions have important implications for a wide range of individuals, including academics, financial advisers, and government. Our modelling work will be of direct use to analysts in Whitehall, and can be adapted to other countries' contexts. Our modelling work has been made available for use by the research community |
| Sectors | Communities and Social Services/Policy,Education,Financial Services, and Management Consultancy,Government, Democracy and Justice |
| URL | http://www.simdynamics.org |
| Description | Our research has primarily fed into government, through our on-going provision of modelling services. The principal objective of this research effort is to make current best-practice methods of economic analysis accessible to policy makers. Examples of current users include HM Treasury, and the Joseph Rowntree Foundation in their Program to develop an anti-poverty strategy for the UK. The model has been made publicly available via the internet at www.simdynamics.org |
| First Year Of Impact | 2012 |
| Sector | Communities and Social Services/Policy,Education,Government, Democracy and Justice |
| Impact Types | Societal,Economic,Policy & public services |
| Description | A MODEL TO PROVIDE ANALYSIS IN TERMS OF LIFETIME INCOME |
| Amount | £95,013 (GBP) |
| Funding ID | HMT502 |
| Organisation | HM Treasury |
| Sector | Public |
| Country | United Kingdom |
| Start | 01/2012 |
| End | 01/2014 |
| Description | A MODEL TO PROVIDE ANALYSIS IN TERMS OF LIFETIME INCOME |
| Amount | £95,013 (GBP) |
| Funding ID | HMT502 |
| Organisation | HM Treasury |
| Sector | Public |
| Country | United Kingdom |
| Start | 02/2012 |
| End | 01/2014 |
| Description | A model to develop a sustainable anti-poverty strategy for the UK |
| Amount | £236,850 (GBP) |
| Organisation | Joseph Rowntree Foundation (JRF) |
| Sector | Charity/Non Profit |
| Country | United Kingdom |
| Start | 09/2014 |
| End | 09/2015 |
| Description | Contract to analyse proposals for pension policy reform in the UK: adapting the NIBAX behavioural simulation model |
| Amount | £40,128 (GBP) |
| Organisation | Department for Work and Pensions |
| Sector | Public |
| Country | United Kingdom |
| Start | 01/2011 |
| End | 12/2011 |
| Description | Contract to analyse proposals for pension policy reform in the UK: adapting the NIBAX behavioural simulation model |
| Amount | £40,128 (GBP) |
| Organisation | Department for Work and Pensions |
| Sector | Public |
| Country | United Kingdom |
| Start | 06/2011 |
| End | 10/2011 |
| Description | Estimating the intertemporal elasticity of substitution |
| Amount | £13,900 (GBP) |
| Organisation | University of Melbourne |
| Sector | Academic/University |
| Country | Australia |
| Start | 01/2014 |
| End | 12/2015 |
| Description | Estimating the intertemporal elasticity of substitution |
| Amount | £13,900 (GBP) |
| Organisation | University of Melbourne |
| Sector | Academic/University |
| Country | Australia |
| Start | 01/2014 |
| End | 12/2015 |
| Description | Estimating the intertemporal elasticity of substitution on cross-sectional data - a new empirical approach |
| Amount | £7,600 (GBP) |
| Organisation | Government of New Zealand |
| Department | New Zealand Treasury |
| Sector | Public |
| Country | New Zealand |
| Start | 09/2013 |
| End | 10/2013 |
| Description | Implications of the UK EU referendum outcome: Impact of migration patterns on the state pension system |
| Amount | £33,300 (GBP) |
| Organisation | Institute and Faculty of Actuaries |
| Sector | Charity/Non Profit |
| Country | United Kingdom |
| Start | 03/2016 |
| End | 04/2016 |
| Description | The role of employer contributions in influencing incentives to save, adequacy, and managing risks |
| Amount | £23,600 (GBP) |
| Organisation | Age UK |
| Sector | Charity/Non Profit |
| Country | United Kingdom |
| Start | 01/2013 |
| End | 12/2014 |
| Description | Wealth at Retirement and Savings Adequacy |
| Amount | £295,000 (GBP) |
| Funding ID | VP\2012\010\ 0019 |
| Organisation | European Commission |
| Sector | Public |
| Country | European Union (EU) |
| Start | 01/2013 |
| Description | Wealth at Retirement and Savings Adequacy |
| Amount | £295,000 (GBP) |
| Funding ID | VP\2012\010\ 0019 |
| Organisation | European Commission |
| Sector | Public |
| Country | European Union (EU) |
| Start | 01/2013 |
| Title | Extending estimation of dynamic programming model of savings to an Overlapping Generations context |
| Description | An OLG structure permits a DP model of savings to be estimated on cross-sectional data, facilitating identification of unobservable preference parameters. |
| Type Of Material | Improvements to research infrastructure |
| Year Produced | 2013 |
| Provided To Others? | Yes |
| Impact | The approach is currently in the testing phase. |
| Title | The LINDA policy analysis tool |
| Description | A model provided to analysts in Whitehall, which facilitates use of best practice methods of economic analysis to explore the medium-to-long-term savings and employment implications of policy counterfactuals. |
| Type Of Material | Computer model/algorithm |
| Year Produced | 2013 |
| Provided To Others? | Yes |
| Impact | Model now in use by HM Treasury and HM Revenue and Customs. |
| Title | Simulator of Individual Dynamic Decisions (SIDD) |
| Description | The Simulator of Individual Dynamic Decisions (SIDD) is a dynamic microsimulation model that projects the evolving histories of a representative population cross-section through time. The model is the product of more than a decade of research and development at the National Institute, and is designed to explore the distributional consequences of discrete changes to the economic environment, including changes to tax and benefits policy. Models of this type are very valuable for distinguishing the effects of policy changes on households with specific characteristics. For example at budget time we are used to statements like "A family with two young children will be better off, but a pensioner household worse off". |
| Type Of Technology | Software |
| Year Produced | 2013 |
| Impact | Model used both at the NIESR, and third party institutions to explore the implications of policy counterfactuals. Other institutions that have used the model include HM Treasury, and the Joseph Rowntree Foundation. |
| URL | https://www.simdynamics.org |
| Description | Analysing Behavioural Responses to Policy Change in Dynamic Decision Environments |
| Form Of Engagement Activity | Participation in an activity, workshop or similar |
| Part Of Official Scheme? | No |
| Geographic Reach | Local |
| Primary Audience | Participants in your research and patient groups |
| Results and Impact | Seminar outlining modelling work undertaken in the project Feedback and information dissemination. |
| Year(s) Of Engagement Activity | 2013 |
| Description | Modelling website |
| Form Of Engagement Activity | Engagement focused website, blog or social media channel |
| Part Of Official Scheme? | No |
| Geographic Reach | International |
| Primary Audience | Professional Practitioners |
| Results and Impact | Website designed to publicise the model framework developed as part of the project to as wide an audience as possible. |
| Year(s) Of Engagement Activity | 2017 |
| URL | https://www.simdynamics.org |
| Description | The Lifetime INcome Distributional Analysis model: LINDA |
| Form Of Engagement Activity | A formal working group, expert panel or dialogue |
| Part Of Official Scheme? | No |
| Geographic Reach | National |
| Primary Audience | Policymakers/politicians |
| Results and Impact | Modelling seminar for analysts in Whitehall. Received positive feedback following the workshop. |
| Year(s) Of Engagement Activity | 2014 |
| Description | The influence of decision making costs on the effectiveness of tax incentives to save |
| Form Of Engagement Activity | Participation in an activity, workshop or similar |
| Part Of Official Scheme? | No |
| Geographic Reach | National |
| Primary Audience | Policymakers/politicians |
| Results and Impact | Seminar to present results from the research to analysts at HM Revenue and Customs, Treasury, and other interested parties. Hosted by HM Revenue and Customs. Increase awareness of the research undertaken, and promote its use in government |
| Year(s) Of Engagement Activity | 2013 |
| Description | The influence of decision making costs on the effectiveness of tax incentives to save |
| Form Of Engagement Activity | A talk or presentation |
| Part Of Official Scheme? | No |
| Geographic Reach | National |
| Primary Audience | Policymakers/politicians |
| Results and Impact | Seminar presented to the New Zealand Treasury as part of a travelling fellowship to consider the feasibility of adapting the modelling framework developed under the project to the New Zealand context Information dissemination of research activity |
| Year(s) Of Engagement Activity | 2013 |
| Description | Using Dynamic Programming Methods to Evaluate Relative Risk Aversion on Cross-sectional Data |
| Form Of Engagement Activity | Participation in an activity, workshop or similar |
| Part Of Official Scheme? | No |
| Geographic Reach | National |
| Primary Audience | Participants in your research and patient groups |
| Results and Impact | Presentation of empirical results derived as part of the project to the Australian National University, Canberra Ongoing email dialog with seminar participants. |
| Year(s) Of Engagement Activity | 2013 |
| Description | Workshop in use of the LINDA model |
| Form Of Engagement Activity | Participation in an activity, workshop or similar |
| Part Of Official Scheme? | No |
| Geographic Reach | National |
| Primary Audience | Policymakers/politicians |
| Results and Impact | A half day training workshop for analysts from HM Treasury and Revenue and Customs, in use of the LINDA model that we have delivered to them. The workshop covered theoretical background, practical matters in use of the model, and analysis of simulation output. Reports from HM Treasury that the model appears to be meeting or exceeding their expectations, and Treasury is now engaged in disseminating the research activity |
| Year(s) Of Engagement Activity | 2014 |