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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

  • Gary V. Engelhardt
  • Anil Kumar

Employer matching of employee 401(k) contributions can provide a powerful incentive to save for retirement. We examine the effect of matching on 401(k) saving accounting for non-linearities in the intertemporal budget set. We use detailed administrative contribution, earnings, and pension plan data from the Health and Retirement Study and estimate that the elasticity of contributions with respect to matching is 0.15-0.27 overall, with sixty percent of this effect on the participation margin and the remaining forty percent on the intensive margin. The estimated after-tax cross-price elasticity of 401(k) contributions with respect to IRA saving is -0.60, which suggests 401(k)s and IRAs are substitutes in tax-deferred saving. We find no evidence of endogenous worker sorting based on the discount rate to plans that offer matching.

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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, August.
  • 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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