My dissertation research focuses on the positive analysis of effectiveness of tax incentive savings programs such as Individual Retirement Accounts (IRAs) on personal savings in the U.S. The literature has been debated over last two decades, but the conclusions are still controversial. Unlike previous studies, I exploit two main policy changes in IRAs to examine its effect on personal savings. First, I consider the change of contribution limits to Spousal IRAs in 1997 as a good source of natural experiment so that I adopt the natural experiment approach to investigate its effect on savings. Secondly, I take advantage of new savings opportunity provided by Taxpayer Relief Act (TRA) of 1997, known as Roth IRAs. Using similar empirical framework (the natural experiment approach) and data set (the Consumer Expenditure Survey (CES) extracts), I examine the effect of Spousal IRAs and Roth IRAs on personal savings, respectively. Evidence indicates that Roth IRAs could stimulate new savings while deductible IRAs might not. Thus I suggest new evidence that the different types of IRAs might have a different savings effect depending on its tax features. Furthermore, these findings could provide very important policy implications on tax incentive savings programs.
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