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NBER Working Papers and Publications
|December 2012||Fettered Consumers and Sophisticated Firms: Evidence from Mexico's Privatized Social Security Market|
with Justine S. Hastings: w18582
This paper brings new evidence from the privatized social security system in Mexico, offering insight into investment behavior and the efficacy of government "nudges" in the context of profit maximizing firms. We use administrative data from the social security system surrounding the government adoption of a new official fee index aimed at simplifying fees and increasing price sensitivity of investors. The fee index combined load and management fees in a particular way, implying that choosing a lower index firm could lead many workers to choose a higher-cost fund for them. We find that before the index, investors of all backgrounds paid little attention to fees when choosing fund managers. Post-policy intervention, investors heavily weighted the fee index regardless of whether doing so cau...