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How do 401(k)s Affect Saving? Evidence from Changes in 401(k) Eligibility

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  • Gelber, Alexander M.

Abstract

This paper investigates the effect of 401(k) eligibility on saving. To address the possibility that eligibility correlates across individuals with their unobserved tastes for saving, I examine a change in eligibility: some individuals are initially ineligible for their 401(k) but become eligible when they have worked at their firm long enough. I find that eligibility raises 401(k) balances, but I find no evidence that other financial assets decrease. I also find no evidence that intertemporal substitution drives increases in saving following eligibility. In response to eligibility, IRA assets increase, consistent with a “crowd-in” hypothesis, and accumulation of cars decreases.

Suggested Citation

  • Gelber, Alexander M., 2009. "How do 401(k)s Affect Saving? Evidence from Changes in 401(k) Eligibility," MPRA Paper 13613, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:13613
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    References listed on IDEAS

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    1. Choi, James J. & Laibson, David & Madrian, Brigitte C., 2004. "Plan Design and 401(K) Savings Outcomes," National Tax Journal, National Tax Association;National Tax Journal, vol. 57(2), pages 275-298, June.
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    More about this item

    Keywords

    Savings; Retirement;

    JEL classification:

    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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