Using 41 million observations on savings for the population of Denmark, we show that the impacts of retirement savings policies on wealth accumulation depend on whether they change savings rates by active or passive choice. Subsidies for retirement accounts, which rely upon individuals to take an action to raise savings, primarily induce individuals to shift assets from taxable accounts to retirement accounts. We estimate that each $1 of government expenditure on subsidies increases total saving by only 1 cent. In contrast, policies that raise retirement contributions if individuals take no action-such as automatic employer contributions to retirement accounts-increase wealth accumulation substantially. We estimate that approximately 15% of individuals are "active savers" who respond to tax subsidies primarily by shifting assets across accounts. 85% of individuals are "passive savers" who are unresponsive to subsidies but are instead heavily influenced by automatic contributions made on their behalf. Active savers tend to be wealthier and more financially sophisticated. We conclude that automatic contributions are more effective at increasing savings rates than subsidies for three reasons: (1) subsidies induce relatively few individuals to respond, (2) they generate substantial crowd-out conditional on response, and (3) they do not increase the savings of passive individuals, who are least prepared for retirement. * We thank Do retirement savings policies-such as tax subsidies, employer-provided pensions, and savings mandates-raise total wealth accumulation or simply induce individuals to shift savings across accounts? Despite extensive research, the answer to this question remains unclear, largely due to limitations in data and research designs (Bernheim, 2002). In this paper, we revisit this question using a panel data set with 41 million observations on savings in both retirement and non-retirement accounts for the population of Denmark. We organize our empirical analysis using a stylized model in which the government uses two policies to raise saving: a price subsidy and an automatic contribution that puts part of an individual's salary in a retirement account. We analyze the impacts of these policies on two types of agents: active savers and passive savers. Active savers make savings decisions by maximizing utility, taking into account the subsidies and automatic contributions. Passive savers make fixed pension contributions that are invariant to the automatic contribution and subsidy. The model predicts that automatic contributions should have no impact on total saving-total flows into non-retirement and retirement accounts-for active savers who can fully offset the automatic contribution by reducing their own voluntary pension contributions. In contrast, the impact of automatic contributions on total saving is ambiguous for passive savers. If passive savers absorb the reduction in disposable income due to the automatic contribution by maintaining a fixed consumption plan and running down their bank balanc...

There is strong evidence that house prices and consumption are closely synchronized. There is, however, disagreement over the causes of this link. This paper examines if there is a wealth effect of house prices on consumption. We use a rich household level panel data set with information about house ownership, income, wealth, and demographics for a large sample of the Danish population in the period 1987-1996. We model the dependence of the growth rate of total household expenditure with unanticipated innovations to house prices. Controlling for factors related to competing explanations, we find little evidence of a housing wealth effect on consumption: unexpected innovations to house prices are uncorrelated with changes in total expenditure at the household level. A reform in 1992 allowed -for the first time -house owners to use their housing equity as collateral for consumption loans. We find that young house owners likely to be affected by credit constraints react to house price changes after 1993. Our findings suggest that house prices impact total expenditure through improved collateral rather than directly through wealth.2

We investigate the feasibility of deriving a measure of total expenditure at the household level from administrative micro-data on income and wealth. We use Danish administrative data that provides measures of disposable income and the holding of different assets at the end of the year. The ability to link the households in the 1994-6 Danish Expenditure Survey to their administrative data for the years around the survey year offers a unique possibility for constructing a measure of total expenditure and of checking directly on the reliability of the imputation. The results are promising.A major impediment to a better understanding of household saving and consumption is the lack of good longitudinal data on expenditures and/or saving. Although various attempts have been made to overcome this problem, none of them are completely satisfactory. One widely used strategy is to use questions regarding sub-components of the total, such as the food expenditure questions in the Panel Study of Income Dynamics (PSID). One of the problems with this information, which is based on recall questions, is that it seems to be very noisy, albeit with no substantial bias; see Browning et al. (2002) for a discussion of the current state of play on asking recall expenditure questions. When we then first difference the noisy data we face a real signal extraction problem. It is also the case that the dynamics of food expenditures may be quite different from the dynamics of other non-durables and durables. An analysis based on food expenditure therefore tells us little directly about the dynamics of expenditure for other goods such as alcohol, tobacco and entertainment. Although attempts have been made to use the expenditure information in the PSID to impute total non-durable expenditure, see Skinner (1987) for the original attempt and Browning et al. (2002) for a discussion of imputing total expenditure from survey data, this strategy has not been widely used.An alternative and widely used strategy to overcome the lack of genuine panel data is to use time series of cross-sections from expenditure surveys to construct quasi-panels (Browning et al., 1985). Although this has proven to be useful in Euler equation estimation, such data cannot tell us a lot about the idiosyncratic dynamics of earnings, asset returns, consumption 1 and saving (Moffitt, 1993).A third strategy is to impute total expenditure from income and wealth information. In this study we investigate the quality of such a measure of total expenditure derived from administrative income-tax-register data at the individual household level. To do this we use Danish register data, which give longitudinal * We are very grateful to Thomas Crossley, Guglielmo Weber, a referee and the editor for comments.

There is continuing controversy over the importance of credit constraints. This paper investigates whether total household expenditure and debt is affected by an exogenous increase in access to credit provided by a credit market reform that enabled Danish house owners to use housing equity as collateral for consumption loans. We find that the magnitude of the response is correlated with the amount of equity released by the reform and that the effect is strongest for younger households. Even for this group, the response was moderate. The aggregate effect of the reform was significant but small. (JEL D14, D91, E21)