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The Effects of Employer Matching in 401(k) Plans
Author(s) -
EVEN WILLIAM E.,
MACPHERSON DAVID A.
Publication year - 2005
Publication title -
industrial relations: a journal of economy and society
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.61
H-Index - 57
eISSN - 1468-232X
pISSN - 0019-8676
DOI - 10.1111/j.0019-8676.2005.00399.x
Subject(s) - matching (statistics) , endogeneity , pension , current population survey , demographic economics , econometrics , economics , population , actuarial science , labour economics , statistics , mathematics , demography , sociology , finance
This paper uses data from the April 1993 pension supplements to the Current Population Survey (CPS) to investigate the impact of employer matching and employee tenure on participation levels in 401(k) plans. While earlier studies examine similar issues, this study makes several advances. First, consistent with the theory that employers may use matching contributions to satisfy nondiscrimination rules, the study shows that correcting for the endogeneity of employer matching substantially increases the estimated effect of matching on participation levels. Second, the study provides evidence that the large positive association between employee tenure and 401(k) participation is because “stayers” tend to be “savers.”