Retirement Plan Type and Employee Mobility: The Role of Selection and Incentive Effects
AbstractEmployer-provided pension plans may affect employee mobility both through an “incentive effect,” where the bundle of benefit characteristics such as vesting rules, pension wealth accrual, risk, and liquidity affect turnover directly, and a “selection effect,” where employees with different underlying mobility tendencies select across plans or across firms with different types of plans. In this paper, we quantify the role of selection by exploiting a natural experiment at a single employer in which an employee’s probability of transitioning from a defined benefit (DB) to a defined contribution (DC) pension plan was exogenously affected by default rules. Using regression discontinuity as well as differences-in-regression-discontinuities (DRD) methods, we find evidence that employees with higher mobility tendencies self-select into the DC plan. Our results suggest that selection likely contributes to the observed positive relationship between the transition from DB to DC plans and employee mobility in settings where employees sort into plans or employers. Counter to conventional wisdom, we find a negative direct effect of the DC plan on turnover relative to the DB plan, which underscores the multi-dimensional difference between these plans.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18902.
Date of creation: Mar 2013
Date of revision:
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Other versions of this item:
- Gopi Shah Goda & Damon Jones & Colleen Manchester, 2013. "Retirement Plan Type and Employee Mobility: The Role of Selection and Incentive Effects," Discussion Papers 13-018, Stanford Institute for Economic Policy Research.
- H0 - Public Economics - - General
- J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
- J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
This paper has been announced in the following NEP Reports:
- NEP-AGE-2013-03-30 (Economics of Ageing)
- NEP-ALL-2013-03-30 (All new papers)
- NEP-DEM-2013-03-30 (Demographic Economics)
- NEP-HRM-2013-03-30 (Human Capital & Human Resource Management)
- NEP-LAB-2013-03-30 (Labour Economics)
- NEP-LMA-2013-03-30 (Labor Markets - Supply, Demand, & Wages)
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