Perception and Salience of Public Pension Contribution Incentives: Evidence from Voluntary Contributions
In this paper, I investigate the perceived valuation of the implicit contribution incentives provided by public pension systems. I take advantage of the unique setting offered by the public pension system in Spain, where self-employed workers can voluntarily determine the level of their Social Security contributions. Using quasi-experimental variations arising from three pension reforms, I find that (i) only 10.35% of self-employed individuals respond to the substantial contribution incentives offered by the Spanish public pension system; (ii) responses are more pronounced when contribution incentives are more salient; (iii) a significant proportion of self-employed individuals overcontribute in cases where contributions yield no pension return. My results suggest that taxpayers face challenges in valuing the implicit contribution incentives of earnings-related public pension systems. I conclude that more salient Social Security contribution incentives could potentially lead to substantial efficiency gains.
Date: 21 February 2024, 17:00 (Wednesday, 6th week, Hilary 2024)
Venue: Nuffield College, New Road OX1 1NF
Venue Details: Chester Room or https://zoom.us/j/92358151794?pwd=cXhtMUZVL2lhRVVuZGw4d0MzOHZZQT09
Speaker: Ander Iraizoz-Olaetxea (University of Oxford)
Organising department: Department of Economics
Part of: Postdoctoral Fellows Seminar
Booking required?: Not required
Audience: Members of the University only
Editor: Edward Clark