The Power of Suggestion: Inertia in 401(k) Participation and Savings Behavior

Madrian, Brigitte C.; Shea, Dennis F.

doi:10.2139/ssrn.223635

Cited by 952 publications

(1,345 citation statements)

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“…Housing and retirement decisions are the biggest financial decisions people make in their lifetimes, and prior research has shown that house buying (Simonsohn & Loewenstein, 2006) and selling (Genesove & Mayer, 2001) are influenced by contract effects and loss aversion respectively, and that participation in retirement savings program (Madrian & Shea, 2001) and the amount of money saved (Thaler & Benartzi, 2004) are influenced by defaults and simple commitment devices respectively. Why may implicit egotism not matter for marriage, occupational and location decisions then?…”

Section: When Do Psychological Taste Shifters Influence Real Decisions?mentioning

confidence: 99%

Spurious? Name similarity effects (implicit egotism) in marriage, job, and moving decisions.

Simonsohn

2011

Journal of Personality and Social Psychology

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Three articles published in the Journal of Personality and Social Psychology have shown that a disproportionate share of people choose spouses, places to live, and occupations with names similar to their own. These findings, interpreted as evidence of implicit egotism, are included in most modern social psychology textbooks and many university courses. The current article successfully replicates the original findings but shows that they are most likely caused by a combination of cohort, geographic, and ethnic confounds as well as reverse causality. Abstract. Three papers published in this journal have shown that a disproportionate share of people choose spouses, places to live, and occupations with names similar to their own. These findings, interpreted as evidence of implicit egotism, are now included in most modern social psychology textbooks and many university courses. This paper successfully replicates the original findings but then shows that they are most likely caused by a combination of cohort, geographic and ethnic confounds, and reverse causality.

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Section: When Do Psychological Taste Shifters Influence Real Decisions?mentioning

confidence: 99%

Spurious? Name similarity effects (implicit egotism) in marriage, job, and moving decisions.

Simonsohn

2011

Journal of Personality and Social Psychology

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“…It may take years before labor and housing markets fully adjust to tax changes. Similarly, the behavioral literature suggests that people might delay altering their savings behavior (Madrian and Shea 2001). Furthermore, while income can be shifted between sources (e.g., between Subchapter C and Subchapter S, as mentioned earlier), these decisions may be costly to reverse, and some may delay making changes until they better understand the costs and benefits of such changes.…”

Section: Short-and Longer-run Responsesmentioning

confidence: 97%

The Elasticity of Taxable Income during the 1990s: New Estimates and Sensitivity Analyses

Giertz

2010

Southern Economic Journal

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Over the past two decades, the elasticity of taxable income has emerged as the central parameter for assessing efficiency and revenue implications from changes to tax policy. This article estimates short-and longer-run responses of taxable (and gross) income to changes in tax rates using panels of U.S. tax returns for the 1990s. With the richest set of income controls, income-weighted elasticity estimates range from 0.19 to 0.33, depending on whether responses are measured over one-or three-year intervals. An alternative approach designed to capture delayed and anticipatory responses yields much larger estimates-ranging from 0.43 over the short term and from 0.78 to 1.46 over the longer term. A continuing obstacle to identification encountered here is that the income controls most likely to control for mean reversion and divergence within the income distribution are also the most likely to absorb independent variation in tax rates, also needed for identification.

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“…13. Perhaps the most striking example is the study of Madrian and Shea (2001), showing that a change in the default option for enrollment in an employer-provided pension plan had an enormous impact on enrollment and pension contribution decisions.…”

Section: Notesmentioning

confidence: 99%

Redistribution toward Low Incomes in Richer Countries

Saez¹

2006

Understanding Poverty

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This essay presents a critical overview of the findings of economic research on the problem of redistribution toward low incomes in developed countries. The discussion is organized as follows. The second section briefly describes the positive and empirical analysis (for which numerous good surveys are available) and focuses mostly on the normative analysis. The third section starts with a discussion of the optimal structure of cash transfer programs, then extends the analysis of optimal transfer programs along various new dimensions. The fourth section discusses how the results of the third section might be affected in situations where individuals may not be able to make the best choices for themselves. The fifth section provides a conclusion and an educated view on what should be done for redistribution toward low incomes.

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The Power of Suggestion: Inertia in 401(k) Participation and Savings Behavior

Abstract: Research support from the National Institute on Aging is gratefully acknowledged. A special thanks to Hewitt Associates for their help in providing the data. Thanks also to

Cited by 952 publications

References 34 publications

Spurious? Name similarity effects (implicit egotism) in marriage, job, and moving decisions.

Spurious? Name similarity effects (implicit egotism) in marriage, job, and moving decisions.

The Elasticity of Taxable Income during the 1990s: New Estimates and Sensitivity Analyses

Redistribution toward Low Incomes in Richer Countries

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