Leslie E. Papke

ECONOMETRIC METHODS FOR FRACTIONAL RESPONSE VARIABLES WITH AN APPLICATION TO 401 (K) PLAN PARTICIPATION RATES

We offer simple quasi-likelihood methods for estimating regression models with a fractional dependent variable and for performing asymptotically valid inference. Compared with log-odds type procedures, there is no difficulty in recovering the regression function for the fractional variable, and there is no need to use ad hoc transformations to handle data at the extreme values of zero and one. We also offer some new, simple specification tests by nesting the logit or probit function in a more general functional form. We apply these methods to a data set of employee participation rates in 401(k) pension plans.

Survey evidence on employer match rates and employee saving behavior in 401(k) plans

Abstract We examine the relationship between employer match rates in 401 (k) plans and employee saving behavior in these plans. Our analysis is based on a recent survey of 401 (k) plan sponsors. Participation rates are positively related to the match rate. Employee contributions appear to be sensitive to the match rate at low matches, but our sample is too small to identify precisely the effect of higher match rates.

Individual financial decisions in retirement saving plans: The role of participant-direction

Contribution rates and asset allocation choices of participants in individual retirement saving accounts have important implications for the adequacy of retirement income. This paper presents econometric evidence on the role that participant investment choice plays in three critical aspects of retirement saving: asset allocation, participant contributions, and account balances. My preferred estimates indicate that participants with asset choice invest about 15 percentage points more in stocks, contribute almost five percentage points more of salary, and have about

Are 401(k) plans replacing other employer-provided pensions? Evidence from panel data

17,000 more in their account than comparable participants without investment choice. Contrary to recent popular wisdom, this evidence suggests that participants choose to invest more in stocks when given the choice, and, for the near-retirement sample I use here, women do not invest more conservatively than men. Investment in stocks is estimated to decline with age, and to be greater for participants with a high school diploma. I find that participant contributions as a percent of salary are sensitive to the marginal income tax rate (a one percentage point increase in the marginal (state income) tax rate facing the participant raises the contribution percentage by almost one-quarter of a percentage point). Finally, I find some evidence that participants save less if they have an alternative defined benefit pension plan, or an Individual Retirement Account.

Choice and Other Determinants of Employee Contributions to Defined Contribution Plans

This paper examines whether sponsors of traditional defined benefit (DB) plans are replacing them with 401(k) or other defined contribution (DC) plans. I compare pension plan offerings by sponsors of a DB plan in 1985 with their offerings in 1992 using Form 5500 filings. I find that 401(k) and other DC plans are substituting for terminated DB plans and that offering a DC plan of any type increases the probability of a DB termination. Thus, it appears that, at the sponsor level, many of the new 401(k) plans are not avenues for net saving but are replacements for the more traditional pension forms.

The Effects of Changes in Michigan's School Finance System

Understanding the role that 401(k) plan characteristics – like investment choice – play in participation and employee contributions is important as more workers rely on this type of retirement plan and proposals for Social Security solvency include individual savings plans. Using the 1992 Health and Retirement Study, this paper investigates which individual and job characteristics are associated with asset choice in defined contribution plans. Investment choice is found to substantially increase contributions to defined contribution plans.

One-Way Treaty with the World: The U.S. Withholding Tax and the Netherlands Antilles

I use district-level panel data from the 1991/92 school year through the 2003/04 school year to study the effects of Proposal A, passed in Michigan in 1994. Proposal A dramatically changed the way schools were funded starting in the 1994/95 school year. I discuss what has happened to the pattern of spending in years before and after the reform, including a discussion of funding equalization. Using the several additional years of data—which include additional periods of substantial funding increases for low-spending districts—and a richer lag structure in an econometric model, I find that increases in spending have nontrivial, statistically significant effects on math test pass rates. The effects are notably larger for districts with initially poor performance.

Panel data methods for fractional response variables with an application to test pass rates

This paper chronicles the experiences of the U.S. withholding tax on interest income. In 1984, the U.S. repealed its 30 percent withholding tax on interest income paid to foreign persons or corporations. While the tax raised little revenue, it had imposed substantial implicit costs on U.S. corporate borrowers. Since, prior to repeal, domestically issued bonds were subject either to withholding or strict information requirements, many U.S. multinationals raised funds through foreign finance subsidiaries, primarily in the Netherlands Antilles, to avoid the tax. Although the withholding tax rate was effectively reduced to zero in the U.S., this paper demonstrates that interest flows were highly sensitive to their after-tax cost.