Working Paper: NBER ID: w22684
Authors: Mathias Dolls; Philipp Doerrenberg; Andreas Peichl; Holger Stichnoth
Abstract: How can retirement savings be increased? We explore a unique policy change in the context of the German pension system to study this question. As of 2004, the German pension authority started to send out annual letters providing detailed and comprehensible information about the pension system and individual expected pension payments. This reform did not change the level of pensions, but only manipulated the knowledge about and salience of expected pension payments. Using German tax return data, we exploit two discontinuities in the age cutoffs of receiving such a letter to study their effects on private retirement savings. Our results show that the letters increase private retirement savings. The effects are fairly sizable and persistent over several years. We further show that the letter increases labor earnings, and that the increase in savings partly crowds out charitable donations. Moreover, we present evidence suggesting that both information and salience drive the savings effect. Our paper adds to a recent literature showing that policies that go beyond the traditional neoclassical reasoning can be powerful to increase savings rates.
Keywords: retirement savings; pension information; behavioral economics; policy reform
JEL Codes: D14; H24; H55; J26
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| pension information letters (H55) | salience (D91) |
| salience (D91) | private retirement savings (D14) |
| information (Y50) | private retirement savings (D14) |
| pension information letters (H55) | private retirement savings (D14) |
| pension information letters (H55) | labor earnings (J31) |
| pension information letters (H55) | charitable donations (D64) |