Monday, February 9, 2015

New papers from the NBER

Veterans' Labor Force Participation: What Role Does the VA's Disability Compensation Program Play?

by Courtney Coile, Mark Duggan, Audrey Guo - #20932 (AG HE LS PE)


We explore trends over time in the labor force participation of veterans and non-veterans and investigate whether these patterns are consistent with a rising role for the Veterans' Affairs Disability Compensation (DC) program, which pays benefits to veterans with service-connected disabilities and has grown rapidly since 2000.

Using 35 years of March CPS data, we find that veterans' labor force participation declined over time in a way that coincides closely with DC growth and that veterans have become more sensitive to economic shocks. Our findings suggest that DC program growth has contributed to recent declines in veterans' labor force participation.

Racial Disparities in Savings Behavior for a Continuously Employed Cohort

by Kai Yuan Kuan, Mark R. Cullen, Sepideh Modrek - #20937 (AG PE)


The wealth gap has reached record highs. At the same time there has been substantial proliferation of 401(k) savings accounts as the dominant retirement savings vehicle, and these accounts make up an increasing proportion of overall wealth. In this paper we examine

401(k) saving behavior of continuously employed workers over an eight-year period at a single, geographically diverse employer. We demonstrate substantial difference in 401(k) savings behavior by employee ethnicity even within a single employer 401(k) plan architecture. We show both African American and Hispanic employees are less likely to participate in the 401(k) plans. Moreover, conditional on participation African Americans contribute a lower proportion of their income to their 401(k) plan on average. We also show that African Americans and Hispanics tend to draw down on their

401(k) balances more often. Finally, we document that both African Americans and Hispanics favor safer assets within their plan options.

Together these differences substantially impact the level of 401(k) balances accumulated and therefore overall wealth accumulation.

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