Retirement Plan Type and Employee Mobility: The Role of Selection and Incentive Effects
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.
We would like to thank Dan Black, John Beshears, Jeff Brown, Kristine Brown, Ezra Golberstein, Jeff Grogger, Caroline Hoxby, David Molitor, Luigi Pistaferri, Aaron Sojourner and participants at the University of Minnesota CHRLS and Population Center, Massachusetts Institute of Technology IWER, and University of Wisconsin-La Crosse research seminars for their helpful comments. This research was supported by the Center for Retirement Research at Boston College pursuant to a grant from the U.S. Social Security Administration through the Steven H. Sandell 2011-2012 Grant Program for Junior Scholars in Retirement Research. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Gopi Shah Goda & Damon Jones & Colleen Flaherty Manchester, 2017. "Retirement Plan Type and Employee Mobility," Journal of Human Resources, vol 52(3), pages 654-679.