Matching Matters in 401(K) Plan Participation

Abstract:     
This study offers new evidence on the effects of the matching contributions made by employers to 401(k) plan accounts on plan participation rates, exploiting microdata from the National Compensation Survey, a large, nationally representative, establishment dataset. It addresses the potential endogeneity of the matching contributions by employing coworker and labor market characteristics as instruments. The results indicate that employer matches have substantial effects. They also indicate that higher match rates tend to be correlated with workers having lower propensities to save; correcting for this endogeneity produces estimates that are bigger than those seen through direct cross‐sectional comparisons.

Number of Pages in PDF File: 25

Accepted Paper Series