American Economic Review: Insights
ISSN 2640-205X (Print) | ISSN 2640-2068 (Online)
Taxing the Wealth of the Poor: Evidence from the Danish Old-Age Support Asset Test
American Economic Review: Insights
(pp. 247–64)
Abstract
We document strong behavioral responses to an asset test for an old-age support program in Denmark using comprehensive administrative data. We show that the density distribution of the liquid assets targeted by the test exhibits large but diffuse excess mass below the threshold for the treated group relative to control groups of comparable but ineligible individuals. A cohort analysis exploiting the panel structure suggests that the program reduces liquid assets by 20 percent around the threshold. Analyzing high-frequency bank data on assets and cash withdrawals shows that the excess mass around the threshold largely reflects permanent rather than temporary responses.Citation
Johannesen, Niels, Johan Sæverud, and Emmanuel Saez. 2026. "Taxing the Wealth of the Poor: Evidence from the Danish Old-Age Support Asset Test." American Economic Review: Insights 8 (2): 247–64. DOI: 10.1257/aeri.20240634Additional Materials
JEL Classification
- D91 Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
- G51 Household Finance: Household Saving, Borrowing, Debt, and Wealth
- H24 Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
- H55 Social Security and Public Pensions
- I32 Measurement and Analysis of Poverty
- J14 Economics of the Elderly; Economics of the Handicapped; Non-labor Market Discrimination