Encouraging New Hires to Save for Retirement

This project examines the impact of employer-provided financial education for newly hired workers on contributions to voluntary retirement savings plans. Using administrative data from five large employers, the researchers assess the impact of information and delivery methods on the choice to participate in the plans and the deferral amount selected. The researchers collected additional data from one employer-partner covering the two years before and after their automatic enrollment policy was implemented. Average participation rates increased sharply, while the same fraction of workers took advantage of the full employer match once eligible. The researchers also conducted a survey of newly hired workers. The survey measured employees’ understanding of their company’s voluntary retirement savings plan, their assessment of the employer-provided information, and their reasons for limited or non-participation. Nonparticipants demonstrated lower overall financial literacy relative to participants, and many respondents felt that the information provided by their employers was not sufficient. Finally, the largest employer-partner, BB&T, implemented a field experiment where an on-line mailing was sent to a random subset of non-participating newly hired workers. Younger workers receiving the flyer were significantly more likely to enroll in the 401(k) plan, while older workers actually had lower initiation rates relative to their control group. The research presented provides insights into the efficacy and importance of financial education provided by employers to newly hired workers and how it impacts their retirement saving decisions.

Women's Labor Supply and the Family

The past century has seen a tremendous rise in female labor force participation. My dissertation addresses aspects of how the American family has shaped and has been shaped by rising levels of female labor supply. The first chapter provides an introduction and discussion. The second chapter describes the impact of maternal employment on children's health. While most prior research has found little effect, I argue that a woman's choice to work may reflect unobservable characteristics of the mother or child which complicates the measurement of the causal effect. I utilize exogenous variation in each child's youngest sibling's eligibility for kindergarten as an instrument for maternal employment. I find robust evidence that maternal employment increases a child's probability of having had an overnight hospitalization, injury or poisoning, or asthma episode. The third and fourth chapters analyze two possible sources of increased female labor force participation. In the third chapter, co-authored with Judith Hellerstein, we consider the role that fathers play in their daughters' occupational choices. We demonstrate that over the past century fathers have increasingly transmitted occupation-specific human capital to their daughters in response to the changing opportunities for women in the labor market. In the fourth chapter, I investigate work first published by Fernandez et al. (2004) and find evidence that contradicts their central conclusions. Their paper suggests a mechanism by which working mothers endow sons with a preference for having a working wife, which in turn leads women to choose to work more in order to attract these men. The key empirical results in their paper show a strong conditional correlation between a woman's labor supply and that of her mother-in-law when her husband was young and no similar relationship between a woman's labor supply and that of her own mother. While I confirm the former relationship in my own analysis, I find that a woman's choice to work is also highly correlated with her own mother's labor supply. While their model provides an interesting hypothesis for women's motivation to work, I find that the data do not support their conclusions

The Role of Financial Literacy in Determining Retirement Plans

Workers nearing retirement face many important, and often irreversible, choices. We collected detailed demographic and financial literacy data on over 1,500 workers nearing retirement at three large companies to assess how individuals are planning for retirement. Many respondents display limited knowledge and understanding of public and company-provided retirement benefits. Controlling for basic demographics and wealth, we find that misconceptions about eligibility ages and plan generosity influence workers’ expected age of retirement. Although retirement-related decisions will affect workers’ wellbeing for the remainder of their lifetimes, many do not possess enough basic financial knowledge to confidently make optimal choices.

The effects of maternal employment on the health of school-age children

The effects of maternal employment on children's health are theoretically ambiguous and challenging to identify. There are trade-offs between income and time, and a mother's decision to work reflects, in part, her children's health and her underlying preferences. I utilize exogenous variation in each child's youngest sibling's eligibility for kindergarten as an instrument. Using the restricted-access National Health Interview Survey (1985-2004), I identify the effects on overnight hospitalizations, asthma episodes, and injuries/poisonings for children ages 7-17. Maternal employment increases the probability of each adverse health event by nearly 200 percent. These effects are robust and do not reflect a non-representative local effect.Children's health Maternal employment Women's labor supply

A New Paradigm: A Joint Test of Structural and Correlation Parameters in Instrumental Variables Regression When Perfect Exogeneity is Violated

Currently, the commonly employed instrumental variables strategy relies on the knifeedge assumption of perfect exogeneity for valid inference. To make reliable inferences on the structural parameters under violations of exogeneity one must know the true correlation between the structural error and the instruments. The main innovation in this paper is to identify an appropriate test in this context: a joint null hypothesis of the structural parameters with the correlation between the instruments and the structural error term. We introduce a new endogeneity accounted test by combining the structural parameter inference while correcting the bias associated with non-exogeneity of the instrument. To address inference under violations of exogeneity, significant contributions have been made in the recent literature by assuming some degree of non-exogeneity. A key advantage of our approach over that of the previous literature is that we do not need to make any assumptions about the degree of violation of exogeneity either as possible values or prior distributions. In particular, our method is not a form of sensitivity analysis. Since our test statistic is continuous and monotonic in correlation, one can conduct inference for the structural parameters by a simple grid search over correlation values. We can make accurate inferences on the structural parameters because of a feature of the grid search over correlation values. One can also build joint confidence intervals for the structural parameters and the correlation parameter by inverting the test statistic. In the inversion, the null values of these parameters are used. We also propose a new way of testing exclusion restrictions, even in the just identified case