Working Paper: CEPR ID: DP17687
Authors: Andrew Caplin; Eungik Lee; Soren Lethpetersen; Johan Sverud
Abstract: Despite its centrality in monetary policy, communication is not a focus in social security reform. We investigate the potential for active communication to dissipate apparently widespread public confusion about the future of social security. We implement a simple information treatment in which we randomly provide survey respondents access to the longevity-based eligibility age implemented by reform that Denmark launched in 2006. Absent treatment, younger workers not only have biased beliefs, expecting to become eligible for social security earlier than policy makers intend, but also are highly uncertain about eligibility age. The information treatment eliminates the bias, suggesting it results from misunderstanding. Yet it has no influence on uncertainty, suggesting this is driven by unavoidable demographic and political uncertainties. Our results highlight the value of communication strategies and belief measurement as policy instruments outside the monetary policy arena.
Keywords: Social security; Belief updating; Information treatment; Policy uncertainty
JEL Codes: D8; H55; J26
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Biased Beliefs (D91) | Expected Eligibility Age (H55) |
| Expected Eligibility Age (H55) | Actual Eligibility Age (J14) |
| Demographic and Political Factors (J11) | Uncertainty about Eligibility Age (J26) |
| Information Treatment (Y20) | Elimination of Biased Beliefs (D91) |
| Information Treatment (Y20) | Uncertainty about Eligibility Age (J26) |