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Tax policy, lump-sum pension distributions, and household saving
As of May 1988, over 8 million workers had received their pension benefits as lump-sum distributions (LSDs) when they changed jobs. In 1986 Congress imposed a 10% tax penalty on the amount of LSDs not rolled over into tax-deferred instruments. This paper examines the effects of this tax penalty on the rollover decisions of LSD recipients. The penalty increases the probability of rollover among higher-income recipients; an increase of 1 percentage point in the penalty is estimated to increase the probability of rollover by 1.1 percentage point. However, the penalty has not affected the ...
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Rational herding and the spatial clustering of bank branches: an empirical analysis
Bank branches in New York City tend to be spatially clustered. For instance, of the 221 branches that were opened in New York City between July, 1990 and June, 1995, 181 (or 82 percent) were opened in census tracts that already had at least one other branch. A number of recent theoretical papers have highlighted the possibility of rational herding in various arenas of economic activity. This paper explores empirically whether the apparent clustering of bank branches can be at least partially attributed to rational herding by banks. We find that even after controlling for the expected ...