Do Employer Pension Contributions Reflect Employee Preferences? Evidence from a Retirement Savings Reform in Denmark
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Do Employer Pension Contributions Reflect Employee Preferences? Evidence from a Retirement Savings Reform in Denmark. / Fadlon, Itzik; Laird, Jessica; Nielsen, Torben Heien.
In: American Economic Journal: Applied Economics, Vol. 8, No. 3, 07.2016, p. 196-216.Research output: Contribution to journal › Journal article › Research › peer-review
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TY - JOUR
T1 - Do Employer Pension Contributions Reflect Employee Preferences? Evidence from a Retirement Savings Reform in Denmark
AU - Fadlon, Itzik
AU - Laird, Jessica
AU - Nielsen, Torben Heien
N1 - JEL D14, J26, J32
PY - 2016/7
Y1 - 2016/7
N2 - This paper studies how firms set contributions to employer provided 401(k)-type pension plans. Using a reform that decreased the subsidy to contributions to capital pension accounts for Danish workers in the top income tax bracket, we provide strong evidence that employers' contributions are based on their employees' savings preferences. We find an immediate decrease in employer contributions to capital accounts, whose magnitude increased in the share of employees directly affected by the reform. This response was large relative to average employee responses within private IRA-type plans and was accompanied by a similar magnitude shift of employer contributions to annuity accounts.
AB - This paper studies how firms set contributions to employer provided 401(k)-type pension plans. Using a reform that decreased the subsidy to contributions to capital pension accounts for Danish workers in the top income tax bracket, we provide strong evidence that employers' contributions are based on their employees' savings preferences. We find an immediate decrease in employer contributions to capital accounts, whose magnitude increased in the share of employees directly affected by the reform. This response was large relative to average employee responses within private IRA-type plans and was accompanied by a similar magnitude shift of employer contributions to annuity accounts.
KW - Faculty of Social Sciences
KW - D14
KW - J26
KW - J32
U2 - 10.1257/app.20150015
DO - 10.1257/app.20150015
M3 - Journal article
VL - 8
SP - 196
EP - 216
JO - American Economic Journal: Applied Economics
JF - American Economic Journal: Applied Economics
SN - 1945-7782
IS - 3
ER -
ID: 131546398