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Retirement Plan Type and Employee Mobility: The Role of Selection and Incentive Effects

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  • Gopi Shah Goda

    (Stanford Institute for Economic Policy Research)

  • Damon Jones

    (University of Chicago)

  • Colleen Manchester

    (University of Minnesota)

Abstract

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.

Suggested Citation

  • Gopi Shah Goda & Damon Jones & Colleen Manchester, 2013. "Retirement Plan Type and Employee Mobility: The Role of Selection and Incentive Effects," Discussion Papers 13-018, Stanford Institute for Economic Policy Research.
  • Handle: RePEc:sip:dpaper:13-018
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    References listed on IDEAS

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    1. Birgitta Rabe, 2007. "Occupational Pensions, Wages, And Job Mobility In Germany," Scottish Journal of Political Economy, Scottish Economic Society, vol. 54(4), pages 531-552, September.
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    7. Colleen Flaherty Manchester, 2010. "The Effect of Pension Plan Type on Retirement Age: Distinguishing Plan Incentives from Career Length Preferences," Southern Economic Journal, John Wiley & Sons, vol. 77(1), pages 104-125, July.
    8. Gopi Shah Goda & Colleen Flaherty Manchester, 2013. "Incorporating Employee Heterogeneity into Default Rules for Retirement Plan Selection," Journal of Human Resources, University of Wisconsin Press, vol. 48(1), pages 198-235.
    9. Olivia S. Mitchell, 1982. "Fringe Benefits and Labor Mobility," Journal of Human Resources, University of Wisconsin Press, vol. 17(2), pages 286-298.
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    Cited by:

    1. Rachel Griffith & Sarah Smith & Stephanie von Hinke Kessler Scholder, 2014. "Getting a healthy start? Nudge versus economic incentives," The Centre for Market and Public Organisation 14/328, The Centre for Market and Public Organisation, University of Bristol, UK.
    2. repec:bri:cmpowp:13/328 is not listed on IDEAS
    3. Ashok Thomas & Luca Spataro, 2016. "The Effects Of Pension Funds On Markets Performance: A Review," Journal of Economic Surveys, Wiley Blackwell, vol. 30(1), pages 1-33, February.
    4. Cory Koedel & P. Brett Xiang, 2017. "Pension Enhancements and the Retention of Public Employees," ILR Review, Cornell University, ILR School, vol. 70(2), pages 519-551, March.

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    More about this item

    JEL classification:

    • H0 - Public Economics - - General
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions

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