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

Gelber, Alexander M. (2009): How do 401(k)s Affect Saving? Evidence from Changes in 401(k) Eligibility.

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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.

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