206 The Journal of Human Resources
This study is organized as follows. In Section II, we describe the HRS data on pensions and earnings. Section III discusses the regression specification, identifica-
tion, and baseline estimates. Section IV presents extensions and robustness checks, and Section V presents additional results that suggest sorting is not confounding our
IV estimates. The sixth section discusses the IVQR results. There is a brief conclu- sion.
II. Data Description
We use detailed data from the first wave of the HRS, a nationally representative random sample of 51–61 year olds and their spouses regardless of
age, which asked about wealth, income, demographics, and employment in 1992. Questions on employment were asked for the job if any held at the time of the
interview, referred to hereafter as the “current job,” as well as up to three previous jobs that lasted five years or longer. For each of these jobs, individuals were asked
first if they were included in a pension, retirement, or tax-deferred savings plan. We consider those who answered “yes” to be in pension-covered employment on that
job. In addition, we consider those who indicated that they were eligible for, but not participating in a plan, to be pension-covered.
For those included in a plan, the survey followed up with a question about plan type for each plan up to three plans for that job: formula-based or defined benefit
DB plan; account-based or defined contribution DC plan; or a combination plan with a mix of DB and DC features. Based on the answer, respondents were routed
through different question sequences, one for DBs, one for DCs, and one for com- bination plans, with each sequence asking about features unique to that plan type,
for example, plan balances, number of years included in the plan, the amount of the employer contribution, the amount of the employee contribution, etc., for DC plans,
and early and normal retirement dates, number of years in the plan, expected benefits, etc., for DB plans. The respective responses allow for the calculation of pension
wealth for each plan type that then can be summed across plans for each job to yield a pension-wealth measure for the job.
A unique feature of the HRS is that the study used the job rosters from the interviews and attempted to collect SPDs from employers of HRS respondents for
all current and previous jobs in which the respondent was covered by a pension. We use these to form our instrument, detailed in the next section.
Specifically, the HRS asked all respondents who reported being in a current or previous pension-covered job to provide the name and address of the employer. To
maintain respondent confidentiality, the HRS attempted to contact the employer, not about the respondent’s pensions per se, but more generally as part of a survey of
pension providers, in which the HRS requested copies of SPDs for the universe of pensions the employer provided to all employees. The HRS then “matched” from
this universe the appropriate pensions to the respondent based on the respondent’s characteristics, for example, union status, method of pay hourly, salaried, commis-
sion, piece rate, occupation, tenure, etc. Ultimately, in the 1992 wave, 65 percent of those with pensions on the current job and 35 percent for pension-covered pre-
vious jobs held five years or longer have an associated SPD.
Engelhardt and Kumar 207
There are a number of important reasons for the failure to match an SPD to the respondent. The respondent may not have given the correct employer name and
address. Alternatively, the HRS may have failed to receive the SPD because the employer may not have complied with the pension-provider survey, the employer
could not be located at the address given, or the employer went out of business or merged with another company and no longer existed under the name given by the
respondent. Finally, the employer may have submitted an SPD, but the HRS was unable to match the SPD to the respondent based on the plan detail and the respon-
dent’s characteristics. For these reasons, the subgroup of individuals in pension- covered employment with an associated SPD may be nonrandom, a point to which
we return below.
A total of 5,607 households have an individual employed at the time of the in- terview. In the next section, we estimate crowd-out on the subsample of 2,728 house-
holds who either were working but not in a pension-covered current job, or were in a pension-covered current job and had a matched SPD. Therefore, the 2,879 house-
holds that is, who are omitted are those who were in a
2,879⳱5,607ⳮ2,728 pension-covered current job, but for whom the HRS failed to match an SPD. Hence,
selection bias is a potential problem for our sample. As an important contribution of this paper is the instrumental-variable strategy
for the pension-wealth estimation based on the SPDs, and the highest SPD rate was for current jobs 65 percent, we focus on those with current jobs. Due to the age-
based sampling frame of the HRS, respondents’ current jobs are likely to be their career jobs, which generate the bulk of their lifetime private pension benefits Gust-
man and Steinmeier 1999.
Finally, in addition to the extensive pension data, the HRS asked respondents’ permission to link their survey responses to administrative earnings data from SSA
and IRS. These administrative data include Social Security covered-earnings histo- ries from 1951–91 and W-2 earnings records for jobs held from 1980–91, and were
made available for use under a restricted-access confidential data agreement. These data are the basis for our measure of lifetime earnings.
III. Regression Specification, Identification, and Estimation Results
