Information, the Introduction of Roths, and IRA Participation

This study investigates the issue of whether part of the increase in total IRA contributions from 1997 to 1998 can be attributed to increased advertising due to the introduction of Roth IRAs in 1998. In this study, the use of a tax preparer will proxy for exposure to information regarding IRAs. A preparer is expected to have less of an influence on IRA participation in 1998 relative to 1997. I find evidence supporting this prediction amongst taxpayers eligible for an IRA contribution in both 1997 and 1998. However, I also find evidence suggesting that more information would have led to a potentially sizable increase in participation for taxpayers newly eligible for an IRA contribution in 1998.