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Employer matching and 401(k) saving: Evidence from the health and retirement study

In: Trans-Atlantic Public Economics Seminar (TAPES), Public Policy and Retirement

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  • Gary V. Engelhardt
  • Anil Kumar

Abstract

Employer matching of employee 401(k) contributions can provide a powerful incentive to save for retirement and is a key component in pension-plan design in the United States. Using detailed administrative contribution, earnings, and pension-plan data from the Health and Retirement Study, this analysis formulates a life-cycle-consistent two-limit censored regression model of 401(k) saving and estimates the effect of matching on 401(k) saving accounting for non-linearities in the household budget set induced by matching. Parametric and semi-parametric estimates indicate that an increase in the match rate by 25 cents per dollar of employee contribution raises 401(k) saving by $500-$800 (in 1991 dollars), and the estimated elasticity of contributions with respect to matching ranges from 0.06-0.17 overall, with two-thirds of this effect on the extensive margin and one-third on the intensive margin.

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This chapter was published in:

  • Sören Blomquist & Roger Gordon, 2007. "Trans-Atlantic Public Economics Seminar (TAPES), Public Policy and Retirement," NBER Books, National Bureau of Economic Research, Inc, number blom07-1.
    This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 4359.

    Handle: RePEc:nbr:nberch:4359

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