Temptation and Incentives to Wealth Accumulation

We propose a rich model of household behavior to study the effect two important policies: mortgage interest tax deduction and mandatory amortization. These policies have attracted some controversy, first because they are conceived increase overall saving, an objective that literature does not agree can achieve, second incentivize illiquid savings may thus share ‘wealthy hand-to-mouth’ households. build life-cycle where housing act as commitment device counteract present biases arising from temptation. show matches several empirical facts, including large wealthy hand-to-mouth evaluate find wealth accumulation by 7 10% respectively. Our results demonstrate these only induce portfolio re-balancing, emphasized previous literature, but also making more accessible.