We show that the effects of taxes on labor supply are shaped by interactions between adjustment costs for workers and hours constraints set by firms. We develop a model in which firms post job offers characterized by an hours requirement and workers pay search costs to find jobs. We present evidence supporting three predictions of this model by analyzing bunching at kinks using Danish tax records. First, larger kinks generate larger taxable income elasticities. Second, kinks that apply to a larger group of workers generate larger elasticities. Third, the distribution of job offers is tailored to match workers' aggregate tax preferences in equilibrium. Our results suggest that macro elasticities may be substantially larger than the estimates obtained using standard microeconometric methods.

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...

We show that the effects of taxes on labor supply are shaped by interactions between adjustment costs for workers and hours constraints set by firms. We develop a model in which firms post job offers characterized by an hours requirement and workers pay search costs to find jobs. We present evidence supporting three predictions of this model by analyzing bunching at kinks using Danish tax records. First, larger kinks generate larger taxable income elasticities. Second, kinks that apply to a larger group of workers generate larger elasticities. Third, the distribution of job offers is tailored to match workers' aggregate tax preferences in equilibrium. Our results suggest that macro elasticities may be substantially larger than the estimates obtained using standard microeconometric methods. JEL Codes: H20, J20.

International audienceWhat explains the restrictive turn towards immigrants in European countries like Denmark? Are countries returning to nationalism, or are they following a general European trend towards a perfectionist, even 'repressive' liberalism that seeks to create 'liberal people' out of immigrants? Recent developments in Danish policies of integration and citizenship, education and anti-discrimination suggest a combination of these two diagnoses. The current Danish 'integration philosophy' leaves behind a previous concern with private choice and equal rights and opportunities to emphasize other historical elements, especially the duty to participate in upholding democracy and the egalitarian welfare community, and to promote autonomous and secular ways of life. However, the virtues of this 'egalitarian republicanism' are seen by right-of-centre intellectuals and politicians as rooted in a wider Christian national culture that immigrants must acquire in order to become full citizens

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 Christopher Carroll, James Choi, Gary Engelhardt, William Gale, Nathan Hendren, Lawrence Katz, Patrick Kline, David Laibson, Brigitte Madrian, Jonathan Parker, James Poterba, Emmanuel Saez, Andrew Samwick, Laszlo Sandor, Karl Scholz, Jesse Shapiro, Jonathan Skinner, Danny Yagan, anonymous referees, and numerous seminar participants for helpful comments and discussion. Sarah Abraham, Shelby Lin, Alex Olssen, Heather Sarsons, Michael Stepner, and Evan Storms provided outstanding research assistance. This research was supported by The Danish Council for Independent Research and by the U.S. Social Security Administration through grant #5 RRC08098400-05-00 to the National Bureau of Economic Research as part of the SSA Retirement Research Consortium. The findings and conclusions expressed are solely those of the authors and do not represent the views of SSA, any agency of the Federal Government, or the NBER. John Friedman is currently on leave from Harvard, working at the National Economic Council. This work does not represent the views of the NEC. I IntroductionDo 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 organ...