Working Paper: NBER ID: w23590
Authors: Joshua Blumenstock; Michael Callen; Tarek Ghani
Abstract: We report on an experiment examining why default options impact behavior. By randomly assigning employees to different varieties of a salary-linked savings account, we find that default enrollment increases participation by 40 percentage points—an effect equivalent to providing a 50% matching incentive. We then use a series of experimental interventions to differentiate between explanations for the default effect, which we conclude is driven largely by present-biased preferences and the cognitive cost of thinking through different savings scenarios. Default assignment also changes employees' attitudes toward saving, and makes them more likely to actively decide to save after the study concludes.
Keywords: defaults; savings behavior; randomized controlled trial; Afghanistan; behavioral economics
JEL Codes: D14; D15; D9; O1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| present bias (D15) | likelihood of remaining at default assignments (C78) |
| cognitive costs (D91) | persistence of default effects (G41) |
| default enrollment (I13) | participation in the savings account (D14) |
| default enrollment (I13) | employee attitudes toward saving (D14) |