nep-dcm 2006-08-26 papers

on Discrete Choice Models

Issue of 2006‒08‒26
two papers chosen by
Philip Yu
Hong Kong University

A Note on the Correlated Random Coefficient Model By Christophe Kolodziejczyk
Employer matching and 401 (k) participation: evidence from the health and retirement study By Gary V. Engelhardt; Anil Kumar

A Note on the Correlated Random Coefficient Model

By:	Christophe Kolodziejczyk (Department of Economics, University of Copenhagen)
Abstract:	In this note we derive the bias of the OLS estimator for a correlated random coefficient model with one random coefficient, but which is correlated with a binary variable. We provide set-identification to the parameters of interest of the model. We also show how to reduce the bias of the estimator.
Keywords:	correlated random coefficient model; bias; discrete choice
JEL:	C13 C21
Date:	2006–08
URL:	http://d.repec.org/n?u=RePEc:kud:kuieca:2006_10&r=dcm

Employer matching and 401 (k) participation: evidence from the health and retirement study

By:	Gary V. Engelhardt; Anil Kumar
Abstract:	Employer matching of employee 401(k) contributions can provide a powerful incentive to save for retirement and is a key component in pension-plan design in the United States. Using detailed administrative contribution, earnings, and pension-plan data from the Health and Retirement Study, this analysis formulates a life-cycle-consistent discrete choice regression model of 401(k) participation and estimates the determinants of participation accounting for non-linearities in the household budget set induced by matching. The estimates indicate that an increase in the match rate by 25 cents per dollar of employee contribution raises 401(k) participation by 3.75 to 6 percentage points, and the estimated elasticity of participation with respect to matching ranges from 0.02-0.07. The estimated elasticity of intertemporal substitution is 0.74-0.83. Overall, the analysis reveals that matching is a rather poor instrument with which to raise retirement saving.
Keywords:	Saving and investment ; Taxation ; Pensions
Date:	2006
URL:	http://d.repec.org/n?u=RePEc:fip:feddwp:0601&r=dcm

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