Who is Easier to Nudge?
May 19, 2016Macro, Trade, and Finance Seminar Series

Speaker: John Beshears is an Assistant Professor of Business Administration at Harvard University. More »

Abstract: We study heterogeneity in responsiveness to choice architecture, focusing on the propensity of low-income versus high-income employees to opt out of the default contribution rate in 401(k) retirement savings plans. We develop a statistical model to distinguish between two underlying sources of heterogeneity: low-income employees may be more likely to remain at the default because (i) it is similar to the target contribution rates that they would have selected for themselves anyway or (ii) they are simply slower to opt out of the default, controlling for the target contribution rates that they would select upon opting out. Applying the model to compare below-median-income and above-median-income employees at ten large companies, we estimate that the second source of heterogeneity accounts for two-thirds of the 10 percentage point difference in the probability of remaining at the default after two years of tenure, conditional on having a non-default target contribution rate. We also study two firms that changed the default, and we find that low-income employees are more likely to respond to the change in the default by switching their target contribution rates to correspond with the new default.


Last Updated: May 16, 2016

The Macro, Trade, and Finance Seminar Series is a weekly series hosted by the World Bank's research department. The series invites leading researchers from the fields of macroeconomics, growth, trade, international integration, and finance to present the results of their most recent research in a seminar format. The full list of seminars can be viewed here.

Last Updated: Jul 27, 2015

Event Details
  • Date: May 19, 2016
  • Location: MC C2-137
  • Time: 12:30 – 2:00 pm
  • CONTACT: Shweta Mesipam

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