Marginal tax rates and tax-favoured pension savings of the self-employed: Evidence from Sweden

In recent years, the study of how individuals respond to policies that aim at promoting pension savings has emerged as a vital area of economic research. This paper adds to this literature by estimating the tax price elasticity of contributions to tax-favoured pension savings accounts on a population of self-employed individuals. I exploit a unique total data base over the Swedish population that covers the years 1999 to 2005. Using instrumental variables, I obtain a tax price elasticity estimate of -0.51 and an income elasticity estimate of 0.13, whereas OLS produces estimates that conflict with consumer theory.