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Pension Plan Characteristics and Framing Effects in Employee Savings Behavior

Author

Listed:
  • David Card

    (University of California, Berkeley, and NBER)

  • Michael Ransom

    (Brigham Young University)

Abstract

Defined contribution pensions in many postsecondary institutions are funded by a combination of an employer premium and a mandatory employee premium. Individuals can also contribute to a supplemental savings account. Holding constant total compensation, standard reasoning suggests that supplemental savings should depend negatively on the sum of the employer and employee pension contributions. Contrarily, we find that the supplementary savings of professors are significantly more sensitive to employee contributions than to employer contributions. This asymmetry is consistent with different marginal propensities to save out of the salary and pension components of compensation. Nevertheless, impacts on lifetime utility are relatively modest. © 2011 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Suggested Citation

  • David Card & Michael Ransom, 2011. "Pension Plan Characteristics and Framing Effects in Employee Savings Behavior," The Review of Economics and Statistics, MIT Press, vol. 93(1), pages 228-243, February.
    • Handle: RePEc:tpr:restat:v:93:y:2011:i:1:p:228-243
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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