Retirement Plan Type and Employee Mobility: The Role of Selection and Incentive Effects / Gopi Shah Goda, Damon Jones, Colleen Flaherty Manchester.

Format:

Book

Author/Creator:

Goda, Gopi Shah.

Contributor:

National Bureau of Economic Research.

Jones, Damon.

Flaherty Manchester, Colleen.

Series:

Working Paper Series (National Bureau of Economic Research) no. w18902.

NBER working paper series no. w18902

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2013.

Summary:

Employer-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.

Notes:

Print version record

March 2013.