Working papers
- Smaller than We Thought? The Effect of Automatic Savings Policies
(with David Laibson, Jordan Cammarota, Richard Lombardo, and John Beshears), 2024 - Does Pension Automatic Enrollment Increase Debt? Evidence from a Large-Scale Natural Experiment
(with John Beshears, Matthew Blakstad, Chris Firth, John Gathergood, David Laibson, Richard Notley, Jesal D. Sheth, Will Sandbrook, and Neil Stewart), 2024
Exploiting randomized timing of the pension automatic enrollment mandate at U.K. firms, we find that automatic enrollment increases borrowing but also modestly increases credit scores and decreases debt delinquency. - Better than Human? Experiments with AI Debt Collectors
(with Dong Huang, Zhishu Yang, and Qi Zhang), 2024
We test the ability of AI versus human callers to get delinquent consumer borrowers to repay. AI underperforms humans, even after netting out labor costs. Initial exposure to AI callers before getting switched to human callers creates a small but permanent impairment to the lender’s ability to collect from the borrower, relative to being called only by humans. - Does 401(k) Loan Repayment Crowd Out Retirement Saving? Evidence from Administrative Data and Implications for Plan Design
(with John Beshears, Joel Dickson, Aaron Goodman, Fiona Greig, and David Laibson), 2024
401(k) contribution rates are remarkably stable during and after 401(k) loan origination and hardship withdrawals, suggesting that most participants taking a penalty-free emergency withdrawal under the SECURE 2.0 law would be able to repay these withdrawals through an “automatic repayment” provision on top of their previous contribution rate. - Employer-Based Short-Term Savings Accounts
(with Sarah Holmes Berk, John Beshears, Jay Garg, and David Laibson), 2023
When employer-based rainy-day savings accounts are offered on an opt-in basis, almost nobody uses them. But among those who do opt in, the vast majority are still using them a year later. - Optimal Illiquidity
Journal of Financial Economics, revision requested
(with John Beshears, Christopher Clayton, Christopher Harris, David Laibson, and Brigitte C. Madrian), 2023
The socially optimal retirement savings system is well-approximated by a three-account system with a completely liquid account, a completely illiquid account, and an account with a ≈10% early withdrawal penalty—mirroring the U.S. system. The partially illiquid account can be eliminated with almost no loss of total social welfare. - Automating Short-Term Payroll Savings: Evidence from Two Large U.K. Experiments
(with Sarah Holmes Berk, Jay Garg, John Beshears, and David Laibson), 2023
Introducing automatic enrollment into a rainy-day savings account funded by payroll deduction at your job increases participation rates by ~50 percentage points relative to opt-in enrollment. - Practical Finance: An Approximate Solution to Life-Cycle Portfolio Choice
(with Canyao Liu and Pengcheng Liu), 2022
We provide an easily computed approximation to the optimal portfolio percentage that should be invested in equities at each age when you have labor income followed by a retirement income benefit.
Journal articles
Published papers are slightly different than the drafts posted here because of editorial changes.
- Automatic Enrollment with a 12% Default Contribution Rate
Journal of Pension Economics and Finance, forthcoming
(with John Beshears, Ruofei Guo, David Laibson, and Brigitte C. Madrian)
In a retirement savings plan with an unusually high and clearly suboptimal 12% of income default contribution rate, most employees opt out of the default. But those who remain at the default have lower average income, suggesting that low-income employees face higher barriers to active financial decision making. - A Randomized Trial of Behavioral Nudges Delivered Through Text Messages to Increase Influenza Vaccination Among Patients With an Upcoming Primary Care Visit
American Journal of Health Promotion, 2023
(with Mitesh Patel, Katherine L. Milkman, Linnea Gandhi, Heather N. Graci, Dena Gromet, Hung Ho, Joseph S. Kay, Timothy W. Lee, Jake Rothschild, Modupe Akinola, John Beshears, Jonathan E. Bogard, Alison Buttenheim, Christopher Chabris, Gretchen B. Chapman, Hengchen Dai, Craig R. Fox, Amir Goren, Matthew D. Hilchey, Jillian Hmurovic, Leslie K. John, Dean Karlan, Melanie Kim, David Laibson, Cait Lamberton, Brigitte C. Madrian, Michelle N. Meyer, Maria Modanu, Jimin Nam, Todd Rogers, Renante Rondina, Silvia Saccardo, Maheen Shermohammed, Dilip Soman, Jehan Sparks, Caleb Warren, Megan Weber, Ron Berman, Chalanda N. Evans, Seung Hyeong Lee, Christopher K. Snider, Eli Tsukayama, Christophe Van den Bulte, Kevin G. Volpp, and Angela L. Duckworth)
In a field experiment testing 19 different nudges delivered by text message to 74,811 patients, we find that messages describing a flu vaccine as “reserved for you” are most effective at encouraging vaccination. The largest treatment effect is a 3 percentage point increase in vaccination rate. This paper contains the final results of the study whose interim results were previously published in PNAS. - Popular Personal Financial Advice versus the Professors
Journal of Economic Perspectives, 2022
I survey the advice given by the 50 most popular personal finance books (by authors such as Suze Orman and Dave Ramsey) and compare it to the normative prescriptions of academic economic theory.
Supplement: Advice classification by book, with supporting quotes - Millionaires Speak: What Drives Their Personal Investment Decisions?
Journal of Financial Economics, 2022
(with Svetlana Bender, Danielle Dyson, and Adriana Z. Robertson)
How well do leading academic theories describe wealthy individuals’ financial beliefs and decisions? We survey U.S. individuals with >$1 million of investable assets about which factors were important in determining the fraction of their portfolio invested in stocks, their beliefs about the cross-section of stock returns, their beliefs about active investment management, and why they hold >10% of their net worth in a single stock. The beliefs of the rich about financial markets and the economy are surprisingly similar to those of the average household.
Supplement: Online appendix and data and replication code - Borrowing to Save? The Impact of Automatic Enrollment on Debt
Journal of Finance, 2022
(with John Beshears, David Laibson, Brigitte C. Madrian, and William L. Skimmyhorn)
Automatic enrollment in a retirement savings plan causes no change in credit scores, financial distress, or debt balances excluding auto and first mortgage debt. We also find no significant increase in auto and first mortgage debt, but we estimate these null effects with less precision.
Supplement: Online appendix - Present Bias Causes and Then Dissipates Auto-Enrollment Savings Effects
AEA Papers and Proceedings, 2022
(with John Beshears, David Laibson, and Peter Maxted)
A model where present bias causes people to stick to retirement savings plan defaults, but also to spend their retirement money before they retire - Randomizing Religion: The Impact of Protestant Evangelism on Economic Outcomes
Quarterly Journal of Economics, 2021
(with Gharad Bryan and Dean Karlan)
We randomly assign whether ultra-poor Filipinos are offered a 15-week Protestant Christian values and theology education program. Six months after the program ended, invited individuals have higher religiosity and higher income, but decreased perceived relative economic status. Thirty months after the program ended, differences in religiosity intensity fade, but invited individuals are more likely to be Protestant, and there is some mixed evidence that their consumption and perceived relative economic status are higher.
Supplement: Online appendix and Transform teachers manuals - A Mega-Study of Text-Based Nudges Encouraging Patients to Get Vaccinated at an Upcoming Doctor’s Appointment
Proceedings of the National Academy of Sciences, 2021
(with Katherine L. Milkman, Mitesh S. Patel, Linnea Gandhi, Heather Graci, Dena Gromet, Hung Ho, Joseph Kay, Timothy Lee, Modupe Akinola, John Beshears, Jon Bogard, Alison Buttenheim, Christopher Chabris, Gretchen B. Chapman, Hengchen Dai, Craig R. Fox, Amir Goren, Matthew Hilchey, Jillian Hmurovic, Leslie John, Dean Karlan, Melanie Kim, David Laibson, Cait Lamberton, Brigitte C. Madrian, Michelle N. Meyer, Maria Modanu, Jimin Nam, Todd Rogers, Renante Rondina, Silvia Saccardo, Maheen Shermohammed, Dilip Soman, Jehan Sparks, Caleb Warren, Megan Weber, Rob Berman, Chalanda Evans, Christopher Snider, Eli Tsukayama, Christophe Van den Bulte, Kevin Volpp, and Angela Duckworth)
In a field experiment testing 19 different nudges on 47,306 patients, we find that text messages can increase flu vaccination rates by 5 percentage points. Nudges work better if they are framed as reminders to get a vaccine already reserved for the patient, and are not surprising, casual, or interactive. The most effective nudge reminded patients twice to get their flu shot and said that the shot was reserved for them. - Carhart (1997) Mutual Fund Performance Persistence Disappears Out of Sample
Critical Finance Review, 2021
(with Kevin Zhao)
The seminal Carhart (1997) paper found that U.S. equity mutual funds’ past-year returns positively predict their next year’s returns due to stock-level momentum. We find that the significance of this performance persistence disappears after Carhart’s sample period. Even within Carhart’s sample, persistence is weak in later years.
Supplement: Replication code
- Active Choice, Implicit Defaults, and the Incentive to Choose
Organizational Behavior and Human Decision Processes, 2021
(with John Beshears, David Laibson, and Brigitte C. Madrian)
Requiring people to make an active choice by a deadline increases take-up of beneficial options, but the probability of compliance with the requirement depends on the attractiveness of the outcome implemented if no active choice is made. Therefore, this “implicit default” is an important element of choice architecture. - What Matters to Individual Investors? Evidence from the Horse’s Mouth
Journal of Finance, 2020
(with Adriana Z. Robertson)
How well do leading academic theories describe individuals’ financial beliefs and decisions? We survey a representative sample of U.S. adults about the determinants of the fraction of their portfolio invested in stocks, their beliefs about active investment management, and their beliefs about the cross-section of stock returns.
Supplement: Online appendix and data and replication code - Which Early Withdrawal Penalty Attracts the Most Deposits to a Commitment Savings Account?
Journal of Public Economics, 2020
(with John Beshears, Christopher Harris, David Laibson, Brigitte C. Madrian, and Jung Sakong)
Experimental subjects who divide money between two accounts—one they can withdraw from without penalty, and one with an early withdrawal penalty—allocate more money to the illiquid account as its penalty increases if the two accounts pay the same interest rate, consistent with a demand for commitment. But when the illiquid account pays a higher interest rate than the liquid account, the relationship between penalties and illiquid account deposits is flat, suggesting the presence of naive present-biased agents or agents without present bias.
Supplement: Online appendix and data and replication code - Do Physician Incentives Increase Patient Medication Adherence?
Health Services Research, 2020
(with Edward Kong, John Beshears, David Laibson, Brigitte C. Madrian, Kevin Volpp, George Loewenstein, and Jonathan Kolstad)
In a randomized controlled trial, we find that monetary incentives for physicians to increase the medication adherence of their patients don’t work. - Does Aggregated Returns Disclosure Increase Portfolio Risk-Taking?
Review of Financial Studies, 2017
(with John Beshears, David Laibson, and Brigitte C. Madrian)
Winner, TIAA Paul A. Samuelson Prize for Outstanding Scholarly Writing on Lifelong Financial Security
Seeing ongoing portfolio returns less often or historical returns aggregated over longer periods doesn’t increase risk-taking. This finding contradicts some classic myopic loss aversion results, which we show are sensitive to small changes in experimental design.
Typeset version of article is here
Supplement: Online appendix - Does Front-Loading Taxation Increase Savings? Evidence from Roth 401(k) Introductions
Journal of Public Economics, 2017
(with John Beshears, David Laibson, and Brigitte C. Madrian)
Employee 401(k) contributions are insensitive to whether the contributions are made into a before-tax account versus a Roth account, probably because of confusion about and neglect of their taxation. Thus, introducing Roth 401(k)s increases the amount of retirement consumption purchased. - Small Cues Change Savings Choices
Journal of Economic Behavior and Organization, 2017
(with Emily Haisley, Jennifer Kurkoski, and Cade Massey)
Just mentioning a specific 401(k) contribution choice in an email causes employees to subsequently make contribution choices closer to the mentioned contribution.
Summarized in Vox and NBER Bulletin on Aging and Health - Evaluation of a Commitment Contract to Improve HIV Medication Adherence and Persistence
AIDS, 2017
(with Marcella Alsan, John Beshears, Wendy Armstrong, Brigitte C. Madrian, Minh Ly T. Nguyen, Carlos del Rio, David Laibson, and Vincent C. Marconi)
Offering HIV patients a contract that pays them for correctly taking their medications can improve viral load suppression. - Religious Identity and Economic Behavior
Review of Economics and Statistics, 2016
(with Daniel J. Benjamin and Geoffrey Fisher)
Lead article
We infer the marginal effect of religious identity norms by comparing experimental choices when subjects’ religious identity is or is not salient to them. Religious identity salience increases contributions to public goods for Protestants, while it decreases contributions to public goods, expectations of others’ contributions to public goods, and risk aversion for Catholics.
Supplement: Online appendix - Vaccination Rates are Associated With Functional Proximity But Not Base Proximity of Vaccination Clinics
Medical Care, 2016
(with John Beshears, David Laibson, Brigitte C. Madrian, and Gwendolyn Reynolds)
Employees are more likely to get a workplace flu vaccine if they have a higher probability of walking by the vaccine clinic location for reasons other than vaccination. But distance between the employee’s desk and the clinic does not predict vaccination probability. - The Effect of Providing Peer Information on Retirement Savings Decisions
Journal of Finance, 2015
(with John Beshears, David Laibson, Brigitte C. Madrian, and Katherine L. Milkman)
Sending low-saving employees information about how much their coworkers are saving in the 401(k) can reduce the recipients’ subsequent 401(k) contributions, perhaps because the peer information is discouraging.
Supplement: Online appendix - Contributions to Defined Contribution Pension Plans
Annual Review of Financial Economics, 2015
Reviews the evidence on what determines contributions to defined contribution pension plans.
Typeset version of article is here - Liquidity in Retirement Savings Systems: An International Comparison
American Economic Review Papers and Proceedings, 2015
(with John Beshears, Joshua Hurwitz, David Laibson, and Brigitte C. Madrian)
Comparing the retirement savings systems of Australia, Canada, Germany, Singapore, the U.S., and the U.K, we find that the U.S. is unique in how easy it is to withdraw retirement balances before retirement.
Supplement: Online appendix - What Makes Annuitization More Appealing?
Journal of Public Economics, 2014
(with John Beshears, David Laibson, Brigitte C. Madrian, and Stephen P. Zeldes)
Lead article
We conducted two large surveys to see what life annuity features would make them more or less appealing to consumers.
Summarized in NBER Bulletin on Aging and Health
Supplement: Online appendix - Simplification and Saving
Journal of Economic Behavior and Organization, 2013
(with John Beshears, David Laibson, and Brigitte C. Madrian)
Presenting employees with a simplified menu of contribution rate and asset allocation choices generates durable increases in 401(k) participation and contribution rates.
Older draft summarized in NBER Digest - Testimonials Do Not Convert Patients from Brand to Generic Medication
American Journal of Managed Care, 2013
(with John Beshears, David Laibson, Brigitte C. Madrian, and Gwendolyn Reynolds)
Adding a peer testimonial to a mailed letter about the benefits of generic drugs does not increase the likelihood the recipient switches to a generic. - Consumers’ Misunderstanding of Health Insurance
Journal of Health Economics, 2013
(with George Loewenstein, Joelle Y. Friedman, Barbara McGill, Sarah Ahmad, Suzanne Linck, Stacey Sinkula, John Beshears, Jonathan Kolstad, David Laibson, Brigitte C. Madrian, John A. List, and Kevin G. Volpp)
We conduct surveys that show that most Americans do not understand traditional health insurance plans, but find weaker evidence that a simplified plan would have strong appeal or change healthcare choices. - What Does Stock Ownership Breadth Measure?
Review of Finance, 2013
(with Li Jin and Hongjun Yan)
Lead article
Increases in the fraction of Shanghai Stock Exchange investors who hold a stock predict low future returns for that stock, consistent with sentiment-driven overpricing. But increases in the fraction of institutional investors that hold a stock predict high future returns for that stock, consistent with short-sales constraints becoming less binding.
Data on stock assignments to ownership breadth portfolios are available here - What Goes Up Must Come Down? Experimental Evidence on Intuitive Forecasting
American Economic Review Papers and Proceedings, 2013
(with John Beshears, Andreas Fuster, David Laibson, and Brigitte C. Madrian)
When making predictions about time series that have short-run momentum and long-run partial mean reversion, the median laboratory subject recognizes most of the mean reversion when it occurs quickly but none of it when it occurs slowly.
Online appendix is here - Planning Prompts as a Means of Increasing Preventive Screening Rates
Preventive Medicine, 2013
(with Katherine L. Milkman, John Beshears, David Laibson, and Brigitte C. Madrian)
Adding the six-word planning prompt “Don’t forget! Colonoscopy appointment with… on…” to a yellow sticky note in a mailing increases colonoscopy rates over the next half year from 6.2% to 7.2%, a relative increase of 15%.
Longer working paper version: Following Through on Good Intentions: The Power of Planning Prompts
Summarized in NBER Bulletin on Aging and Health - Planning Prompts as a Means of Increasing Rates of Immunization and Preventive Screening
Public Policy & Aging Report, 2012
(with Hengchen Dai, Katherine L. Milkman, John Beshears, David Laibson, and Brigitte C. Madrian)
Reviews two of our studies showing that planning prompts not only increase healthy behaviors but also are easy and inexpensive to implement. - $100 Bills on the Sidewalk: Suboptimal Investment in 401(k) Plans
Review of Economics and Statistics, 2011
(with David Laibson and Brigitte C. Madrian)
Many employees over age 59.5 are foregoing an arbitrage opportunity because they are not contributing up to their 401(k) match threshold. They could increase their contribution up to the threshold, earn the extra matching dollars, and then immediately withdraw their incremental contributions penalty-free. - Using Implementation Intentions Prompts to Enhance Influenza Vaccination Rates
Proceedings of the National Academy of Sciences, 2011
(with Katherine L. Milkman, John Beshears, David Laibson, and Brigitte C. Madrian)
Adding to a mailing a prompt to write down the date and time one plans to get vaccinated increases subsequent vaccination rates by 4.2 percentage points from a base rate of 33.1%. - Behavioral Economics Perspectives on Public Sector Pension Plans
Journal of Pension Economics and Finance, 2011
(with John Beshears, David Laibson, and Brigitte C. Madrian)
Holding fixed work and salary history, a public employee’s retirement income replacement ratio varies greatly across jurisdictions. We apply lessons from savings behavior in private sector savings plans to the design of public sector plans.
Supplement: Online appendix - Social Identity and Preferences
American Economic Review, 2010
(with Daniel J. Benjamin and A. Joshua Strickland)
We identify the marginal effect of social identity norms by seeing how experimental subjects’ choices change when an aspect of their social identity is made salient to them. Asian-Americans make more patient choices when their ethnicity is made salient. Non-immigrant blacks make more patient choices when their racial identity is made salient. Gender identity salience has no effect on intertemporal or risk choices.
Supplement: Online appendix - Why Does the Law of One Price Fail? An Experiment on Index Mutual Funds
Review of Financial Studies, 2010
(with David Laibson and Brigitte C. Madrian)
Winner, TIAA Paul A. Samuelson Prize for Outstanding Scholarly Writing on Lifelong Financial Security
Wharton MBA students, Harvard staff, and Harvard undergrads don’t minimize fund fees when choosing among S&P 500 index funds in an experiment. Search costs for fees matter, but even when we eliminate them, fees still are not minimized. Fees paid decrease with financial literacy.
Older draft (without Harvard staff sample) summarized in NBER Digest
Supplement: Prospectuses used in experiments - Reinforcement Learning and Savings Behavior
Journal of Finance, 2009
(with David Laibson, Brigitte C. Madrian, and Andrew Metrick)
When investors experience idiosyncratically more rewarding 401(k) returns, they increase their 401(k) contribution rates more than do investors with less rewarding experiences. This is consistent with investors following a naive reinforcement learning heuristic: Increase weights on strategies in which you have personally experienced success. - Mental Accounting in Portfolio Choice: Evidence from a Flypaper Effect
American Economic Review, 2009
(with David Laibson and Brigitte C. Madrian)
401(k) participants choose asset allocations in their salient accounts without considering the allocations in their non-salient accounts. - Optimal Defaults and Active Decisions
Quarterly Journal of Economics, 2009
(with Gabriel D. Carroll, David Laibson, Brigitte C. Madrian, and Andrew Metrick)
Finalist, TIAA Paul A. Samuelson Prize for Outstanding Scholarly Writing on Lifelong Financial Security
Requiring new hires to make an explicit choice about whether to participate in the 401(k) raises participation rates by 28 percentage points relative to opt-in enrollment. We model inertia at the default option as arising from a time-varying opt-out cost and hyperbolic discounting, and derive when the optimal enrollment scheme is opt-in, opt-out, or requirement of an active choice.
Summarized in Summer 2005 NBER Bulletin on Aging and Health
Supplement: Web appendix with proofs
Supplement: Earlier draft with more general model - How Are Preferences Revealed?
Journal of Public Economics, 2008
(with John Beshears, David Laibson, and Brigitte C. Madrian)
Economists usually assume that revealed preferences are the same as the normative preferences that represent the agent’s actual interests. We identify five factors that increase the likelihood that revealed preferences diverge from normative preferences. We then discuss six approaches that jointly contribute to the identification of normative preferences. - Early Decisions: A Regulatory Framework
Swedish Economic Policy Review, 2005
(with John Beshears, David Laibson, and Brigitte C. Madrian)
Early Decision regulations allow consumers to partially commit to their long-run goals, making it harder for a momentary impulse to reverse past decisions. A formal model shows that Early Decisions are superior to sin taxes when preferences are heterogeneous. - Are Empowerment and Education Enough? Underdiversification in 401(k) Plans
Brookings Papers on Economic Activity, 2005
(with David Laibson and Brigitte C. Madrian)
Merely allowing employees to diversify out of employer stock holdings in their 401(k) has little effect on their portfolios. Education that might occur via media coverage of the misfortune of employees at Enron, WorldCom, and Global Crossing—who had large employer stock holdings in their 401(k) when those companies went bankrupt—also has only a modest effect. - Plan Design and 401(k) Savings Outcomes
National Tax Journal, 2004
(with David Laibson and Brigitte C. Madrian)
We show that 401(k) plan design can have an important effect on participation rates, contribution rates, asset allocation, and cash distributions.
Summarized in NBER Digest. - Optimal Defaults
American Economic Review Papers and Proceedings, 2003
(with David Laibson, Brigitte C. Madrian, and Andrew Metrick)
We model inertia at the default option as arising from a time-varying opt-out cost. We numerically solve for the optimal default contribution rate at four firms.
A longer version of this paper is “Passive Decisions and Potent Defaults” - How Does the Internet Affect Trading? Evidence from Investor Behavior in 401(k) Plans
Journal of Financial Economics, 2002
(with David Laibson and Andrew Metrick)
Adding an Internet trading channel to 401(k) plans doubles trading frequency.
Summarized in NBER Digest - The Value Line Enigma: The Sum of Known Parts?
Journal of Financial and Quantitative Analysis, 2000
This was my undergraduate senior thesis. I find that the Value Line Investment Survey’s stock picks have non-zero four-factor alphas, but the magnitudes are probably not large enough to allow profitable trading after transactions costs.
Book chapters
Published chapters are slightly different than the drafts posted here because of editorial changes.
- Building Emergency Savings Through Employer-Sponsored Rainy-Day Savings Accounts
Tax Policy and the Economy, 2020
(with John Beshears, J. Mark Iwry, David C. John, David Laibson, and Brigitte C. Madrian)
The number of Americans living paycheck to paycheck could be reduced by creating employer-sponsored payroll deduction rainy-day savings accounts. We discuss the pros and cons of three implementation options: after-tax 401(k) accounts, deemed Roth IRAs, and depository institution accounts. - Behavioral Household Finance
Handbook of Behavioral Economics – Foundations and Applications 1, 2018
(with John Beshears, David Laibson, and Brigitte C. Madrian)
We survey the household finance literature, starting with key facts and moving on to interventions to shape household financial outcomes. - Who Uses the Roth 401(k), and How Do They Use It?
Discoveries in the Economics of Aging, 2014
(with John Beshears, David Laibson, and Brigitte C. Madrian)
Roth 401(k) participation is more than twice as high among employees hired after the Roth introduction than among those hired before. Conditional on contributing to the Roth, half of employees diversify their contributions across the Roth and another 401(k) account. Roth usage is lower among older employees and women, and only weakly correlated with salary and tenure after controlling for other characteristics.
Summarized in NBER Bulletin on Aging and Health - The Availability and Utilization of 401(k) Loans
Investigations in the Economics of Aging, 2012
(with John Beshears, David Laibson, and Brigitte C. Madrian)
Only 22% of those allowed to borrow from their 401(k) do so at any given point in time, but almost half borrow at some point over a seven-year horizon. The probability of borrowing is hump-shaped with respect to age, tenure, account balance, and salary, but loan size conditional on having a loan declines in these variables. Loans are less common in plans that charge higher interest rates, and loans are smaller when plans allow fewer simultaneous loans, impose a shorter maximum loan duration, or charge a lower interest rate. - How Does Simplified Disclosure Affect Individuals’ Mutual Fund Choices?
Explorations in the Economics of Aging, 2011
(with John Beshears, David Laibson, and Brigitte C. Madrian)
In an experiment, receiving simpler Summary Prospectuses has no effect on mutual fund choices relative to receiving statutory prospectuses.
Summarized in NBER Digest - The Impact of Employer Matching on Savings Plan Participation under Automatic Enrollment
Research Findings in the Economics of Aging, 2010
(with John Beshears, David Laibson, and Brigitte C. Madrian)
Moving from a typical matching structure—a match of 50% up to 6% of pay contributed—to no match reduces participation under automatic enrollment at six months after plan eligibility by 5 to 11 percentage points. Non-contingent employer contributions only weakly crowd out employee participation.
Typeset version of chapter is here - Public Policy and Saving for Retirement: The ‘Autosave’ Features of the Pension Protection Act of 2006
Better Living Through Economics: How Economic Research Improves Our Lives, 2010
(with John Beshears, David Laibson, Brigitte C. Madrian, and Brian Weller)
We summarize the autosave features of the Pension Protection Act of 2006, describe the economic research that motivated them, and discuss how this research was translated into policy. - Reducing the Complexity Costs of 401(k) Participation Through Quick Enrollment
Developments in the Economics of Aging, 2009
(with David Laibson and Brigitte C. Madrian)
Giving employees the option to enroll in their 401(k) at a pre-selected contribution rate and asset allocation—instead of having to make these choices out of a menu with many options—increases 401(k) participation rates.
Typeset version of chapter is here - The Importance of Default Options for Retirement Saving Outcomes: Evidence from the United States
Lessons from Pension Reform in the Americas, 2008
(with John Beshears, David Laibson, and Brigitte C. Madrian)
We summarize the empirical evidence on how defaults affect retirement savings outcomes, including participation, savings rates, asset allocation, and post-retirement savings distributions. We discuss why defaults have such a large impact, and the role of public policy towards retirement saving when defaults matter.
Typeset version of chapter is here - Saving for Retirement on the Path of Least Resistance
Behavioral Public Finance: Toward a New Agenda, 2006
(with David Laibson, Brigitte C. Madrian, and Andrew Metrick)
A slightly updated version of our 2002 “Defined Contribution Pensions: Plan Rules, Participant Decisions, and the Path of Least Resistance” paper. - Passive Decisions and Potent Defaults
Analyses in the Economics of Aging, 2005
(with David Laibson, Brigitte C. Madrian, and Andrew Metrick)
We model default effects as arising from a time-varying opt-out cost and hyperbolic discounting. We solve for the optimal default and find that it is sometimes optimal to set an extreme default that is far from the mean optimal savings rate. We numerically estimate optimal default contribution rates at four companies and find that they are likely to be either 0%, the employer match threshold, or the maximum allowed contribution rate.
Typeset version of chapter is here - Employees’ Investment Decisions About Company Stock
Pension Design and Structure: New Lessons from Behavioral Finance, 2004
(with David Laibson, Brigitte C. Madrian, and Andrew Metrick)
401(k) participants are momentum investors when making decisions about how their new contribution flows will be allocated, but contrarian investors when making reallocation decisions about accumulated balances. - For Better or For Worse: Default Effects and 401(k) Savings Behavior
Perspectives in the Economics of Aging, 2004
(with David Laibson, Brigitte C. Madrian, and Andrew Metrick)
Automatic enrollment dramatically increases 401(k) participation rates relative to opt-in enrollment, but participants tend to accept both the default contribution rate and asset allocation. Automatic enrollment effects persist for at least four years.
Summarized in NBER Digest
Typeset version of chapter is here - Defined Contribution Pensions: Plan Rules, Participant Decisions, and the Path of Least Resistance
Tax Policy and the Economy, 2002
(with David Laibson, Brigitte C. Madrian, and Andrew Metrick)
We identify a key behavioral principle that should partially guide the design of 401(k) plans: employees often follow the path of least resistance. Plan administrators can manipulate the path of least resistance to powerfully influence the savings and investment choices of their employees. We discuss automatic enrollment, automatic cash distributions, employer matching provisions, eligibility requirements, investment options, and financial education.
Summarized in NBER Digest
Typeset version of chapter is here
Resting papers
- Extrapolative Expectations and the Equity Premium
(with Thomas M. Mertens), 2019
A high equity premium and low consumption growth covariance with stock returns can coexist with low risk aversion if investors have extrapolative expectations about dividend growth and an elasticity of intertemporal substitution (EIS) greater than 1. A positive stock return innovation increases expectations of future returns, which dampens consumption growth because EIS > 1. We match U.S. data with relative risk aversion = 4 and EIS = 2. - Informed Trading and Expected Returns
(with Li Jin and Hongjun Yan), 2016
Stocks in which institutional investors have a stronger information advantage have higher future returns, indicating that information asymmetry in a stock increases expected returns.
Summarized in NBER Digest and Vox.
Other writings
- Finance for the Rest of Us
2022
Where should behavioral and household finance research go in the next decade? Two proposals: (1) Listen to what ordinary people have to say, and (2) make finance more practically useful for ordinary people. - How to Give a Good Paper Discussion
2022 - Review of Automatic: Changing the Way America Saves, edited by William G. Gale, J. Mark Iwry, David C. John, and Lina Walker
Journal of Economic Literature, 2010 - Product Proposal: Birthday CDs
2008
Remarks on “Managing Longevity Risk” at the Financial Innovation and Retirement Security: From Ideas to Implementation conference - Retirement Saving: Helping Employees Help Themselves
Milken Institute Review, 2006
(with John Beshears, David Laibson, and Brigitte C. Madrian)
Slide presentations
- Household Finance
2017
Slides from a lecture at the Financial Management Association Annual Meeting - Household Finance and Libertarian Paternalism
2009
Slides from a lecture to Ph.D. students at the 2009 Yale Summer School in Behavioral Finance - Defined Contribution Plans for Passive Investors
2004 (with David Laibson and Brigitte C. Madrian)
Summarizes our recommendations for designing defined contribution retirement savings plans such as 401(k)s and 403(b)s