Department of Economics
London School of Economics
and Political Science
London WC2A 2AE
Institutional Affiliation: London School of Economics
NBER Working Papers and Publications
|July 2019||Who is a Passive Saver Under Opt-In and Auto-Enrollment?|
with Gopi Shah Goda, Colleen Flaherty Manchester, Aaron Sojourner, Joshua Tasoff: w26078
Defaults have been shown to have a powerful effect on retirement saving behavior yet there is limited research on who is most affected by defaults and whether this varies based on features of the choice environment. Using administrative data on employer-sponsored retirement accounts linked to survey data, we estimate the relationship between retirement saving choices and individual characteristics – long-term discounting, present bias, financial literacy, and exponential-growth bias – under two distinct choice environments: an opt-in regime and an auto-enrollment regime. Consistent with our conceptual model, we find that the determinants of following the default and contribution behavior are regime-specific. Under the opt-in regime, financial literacy plays an important role in predicting ...
|August 2015||The Role of Time Preferences and Exponential-Growth Bias in Retirement Savings|
with Gopi Shah Goda, Colleen Flaherty Manchester, Aaron Sojourner, Joshua Tasoff: w21482
There is considerable variation in retirement savings within income, age, and educational categories. Using a broad sample of the U.S. population, we elicit time preference parameters from a quasi-hyperbolic discounting model, and perceptions of exponential growth. We find that present bias (PB), the tendency to value utility in the present over the future in a dynamically inconsistent way, and exponential-growth bias (EGB), the tendency to neglect compounding, are prevalent and distinct latent variables. PB, EGB, and the long-run discount factor are all highly significant in predicting retirement savings, even while controlling for measures of IQ and general financial literacy as well as a rich set of demographic controls. We find that lack of self-awareness of these biases has an additio...