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Pension Plan Characteristics and Framing Effects in Employee Savings Behavior

  • David Card

    (University of California, Berkeley, and NBER)

  • Michael Ransom

    (Brigham Young University)

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.

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Article provided by MIT Press in its journal The Review of Economics and Statistics.

Volume (Year): 93 (2011)
Issue (Month): 1 (February)
Pages: 228-243

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Handle: RePEc:tpr:restat:v:93:y:2011:i:1:p:228-243
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