“Serenity Now, Save Later: Evidence on Retirement Savings Puzzles from a 401(k) Field Experiment” (with Saurabh Bhargava)
Economists have identified several psychological frictions that could explain why many 401(k)-eligible employees undersave for retirement despite generous matching incentives. We investigate four of these frictions through a field experiment that randomized 1,137 low-saving employees at a large US firm to information- and incentive-based treatments at the end of a survey assessing each friction’s baseline prevalence. We describe four findings: (1) We corroborate previous research by showing that low retirement literacy is pervasive and correlated with saving, but present causal evidence that reducing such deficits (by providing specific recommendations) does not affect saving. (2) In an analysis of plan confusion, we estimate that one-fifth to one-third of 401(k) non-participants mistakenly believed themselves to be enrolled, and these employees enrolled at high rates upon discovering their actual status. (3) We find no evidence that enrollment complexity impedes saving: few employees perceived enrollment as prohibitively time-consuming and simplifying enrollment further did not increase saving. (4) Finally, we present new evidence directly implicating present focus as a cause of undersaving by showing that a significant share of employees increased saving in response to an immediate small reward ($10 gift card) but not to a treatment clarifying the dramatically larger, but delayed, plan match. Calibrations suggest that beta-delta models of present-biased preferences cannot plausibly account for the documented behavior and stated beliefs of employees. We propose an alternative hedonic model of present focus that does explain our findings—and possibly other retirement savings puzzles—and offers a psychological rationale for encouraging long-run savings by linking existing 401(k) accounts to a more liquid account designed to relieve near-term financial anxiety.
“Save(d) by Design” (with Saurabh Bhargava, Rick Mason, and Shlomo Benartzi). SSRN Working Paper, October 2018. Featured in Harvard Business Review, Feb. 2020: How digital design drives user behavior.
Online 401(k) enrollment interface design varies extensively along non-economic dimensions such as how options are presented and plan information is displayed. Yet there is little evidence on how these factors affect behavior. We describe field experiments showing that randomized design variation can be very influential, with one design increasing average contributions among over 8,000 employees from 501 different firms by a magnitude equivalent to that predicted by increasing matching incentives by over 60% of the typical match limit. This design also made decisions more responsive to cross-plan variation in match incentives, highlighting complementarities between design and incentives.
“The heterogeneous effect of affirmative action on performance.” 2019. (with Anat Bracha and Alma Cohen). Journal of Economic Behavior & Organization, 158, 173-218.
This paper experimentally investigates the effect of gender-based affirmative action (AA) on performance, focusing on a tournament environment. The tournament is based on GRE math questions commonly used in graduate school admission, and at which women are known to perform worse on average than men. We find that the effect of AA on female participants is heterogeneous: AA lowers the performance of high-ability women and increases the performance of low-ability women. Our results are consistent with two possible mechanisms: One is that AA changes incentives differentially for low- and high-ability women, and the second is that AA triggers stereotype threat.
“The slider task: An example of restricted inference on incentive effects.” 2016. (with Felipe Augusto de Araujo, Erin Carbone, Marli Dunietz, Ania Jaroscewicz, Rachel Landsman, Diego Lam, Lise Vesterlund, Stephanie Wang & Alistair Wilson). Journal of the Economic Science Association, 2(1), 1-12.
Real-effort experiments are frequently used when examining a response to incentives. For a real-effort task to be well suited for this exercise its measurable output must be sufficiently elastic over the incentives considered. The popular slider task in Gill and Prowse (Am Econ Rev 102(1):469–503, 2012) has been characterized as satisfying this requirement, and is increasingly used to investigate responses to incentives. However, a between-subject examination of the slider task’s response to incentives has not been conducted. We provide such an examination with three different piece-rate incentives: half a cent, two cents, and eight cents per slider completed. We find only a small increase in performance: despite a 1500% increase in the incentives, output only increases by 5 %. With such an inelastic response we caution that for typical experimental sample sizes and incentives the slider task is unlikely to demonstrate a meaningful and statistically significant performance response.
“Predicting health behaviors with economic preferences and locus of control.” 2015. (with Julian Jamison). Journal of Behavioral and Experimental Economics, 54: 1-9.
We present new results on the relationship between health behaviors and experimental measures of time and risk preferences. In contrast to recent findings in the economics literature, we find no evidence linking time preference and self-reported health behaviors and outcomes such as smoking and BMI. We also introduce evidence that internal locus of control—a psychological construct that refers to the tendency to attribute to oneself control over outcomes—explains significant variation in health behaviors, in models including traditional measures of risk and time preference