CRI Working Papers
WORKING PAPER | AUGUST 2024
Why Do Employers Establish Retirement Savings Plans? Evidence from State “Auto-IRA” Policies
By Adam Bloomfield, Lucas Goodman, Manita Rao, and Sita Slavov
Several states have recently attempted to boost retirement saving by adopting “auto-IRA” policies that require employers not currently offering an employer-sponsored retirement plan (ESRP) to either (1) establish an ESRP or (2) enroll employees in state-facilitated Individual Retirement Accounts (IRAs). We identify the effect of these state retirement plan mandates on firm decisions to offer ESRPs, treating the gradual rollout of these policies across states and employer size categories as a series of “experiments.” Using U.S. tax microdata, we estimate that at least 30,000 firms have been induced to offer an ESRP by these policies, although there is substantial heterogeneity in these effects across firm and worker characteristics. This effect is large considering that, for employers, establishing and maintaining an ESRP is more costly than utilizing the state-facilitated IRAs. We explore both rational and behavioral explanations for why firms might choose the higher-cost approach to complying with auto-IRA policies.
WORKING PAPER | JULY 2024
The Allure of Round Number Prices for Individual Investors
By Adam Bloomfield, Alycia Chin, and Adam Craig
Trading stocks disproportionately at round number prices (e.g., $5.00 instead of $5.01, “round number bias” [RNB]) violates classical assumptions about investor rationality. However, it is unknown which individual investors engage in this bias. The authors examine the prevalence of RNB and how it relates to individuals’ demographic and trading characteristics by analyzing novel, account-level administrative data covering over 20 million accounts and 134 million transactions. They find that round number trades are 6.7% more likely than expected, and integer trades are nearly four times more likely than expected. Younger, male, and non-professional investors are much more likely to engage in RNB, particularly when buying relative to selling or shorting securities, the first time such heterogeneity has been documented. Given past findings showing large wealth transfers away from those that exhibit RNB, the results suggest potential welfare consequences for individual investors.
WORKING PAPER | MAY 2024
How Do State Retirement Savings Policies Affect Labor Supply?
By Adam Bloomfield, Ngoc Dao, and Manita Rao
This study investigates the labor market impacts of state-based retirement savings policies, often referred to as automatic-enrollment IRA (AutoIRA) programs. Utilizing data from the Annual Social and Economic Supplement to the Current Population Survey (CPS-ASEC) from 2010 to 2023, the authors estimate Two-Way Fixed Effects (TWFE) and staggered Difference-in-Differences (CSDiD) models. Despite the theoretical ambiguity surrounding the effects of workplace retirement savings options on labor markets, empirical findings reveal that these policies increase private-sector employment by 1.8% to 2.3% and may increase earnings by 2% to 4%. These findings contribute to the literature on how retirement savings policies, specifically private pensions (e.g., DC plans and IRAs), influence workers’ labor supply behavior and firms’ wage decisions.