Saving by Default: Evidence from a Field Experiment in Rural India

By Vincent Somville and Lore Vandewalle

American Economic Journal: Applied Economics, July 2018

Access to banks is rapidly increasing worldwide, and allows account-based instead of cash transfers. We conduct a randomized experiment documenting the impact of the payment method on savings behavior. In India, we allocate identical weekly payments into ...

The Persistent Power of Behavioral Change: Long-Run Impacts of Temporary Savings Subsidies for the Poor

By Simone Schaner

American Economic Journal: Applied Economics, July 2018

I use a field experiment in rural Kenya to study how temporary incentives to save impact long-run economic outcomes. Study participants randomly selected to receive large temporary interest rates on an individual bank account had significantly more income...

The Role of Annuitized Wealth in Post-retirement Behavior

By John Laitner, Dan Silverman, and Dmitriy Stolyarov

American Economic Journal: Macroeconomics, July 2018

This paper develops a tractable model of post-retirement behavior with health status uncertainty and state-verification difficulties. The model distinguishes between annuitized and non-annuitized wealth and features means-tested Medicaid assistance with n...

The Effect of Public Pension Wealth on Saving and Expenditure

By Marta Lachowska and Michał Myck

American Economic Journal: Economic Policy, August 2018

This paper examines the degree of substitution between public pension wealth and private saving by studying Poland's 1999 pension reform. The analysis identifies the effect of pension wealth on private saving using cohort-by-time variation in pension weal...

The Impact of Financial Education on Adolescents' Intertemporal Choices

By Melanie Lührmann, Marta Serra-Garcia, and Joachim Winter

American Economic Journal: Economic Policy, August 2018

We study the impact of financial education on intertemporal choice in adolescence. The educational program was randomly assigned among high school students, and choices were measured using an incentivized experiment. Students who participated in the progr...

Incidental Bequests and the Choice to Self-Insure Late-Life Risks

By Lee M. Lockwood

American Economic Review, September 2018

Despite facing significant uncertainty about their lifespans and health care costs, most retirees do not buy annuities or long-term care insurance. In this paper, I find that retirees' saving and insurance choices are highly inconsistent with standard lif...

The Effect of Terrorism on Employment and Consumer Sentiment: Evidence from Successful and Failed Terror Attacks

By Abel Brodeur

American Economic Journal: Applied Economics, October 2018

This paper examines the economic consequences of terror attacks by exploiting the inherent randomness in the success or failure of terror attacks. The findings suggest that successful attacks, in comparison to failed attacks, reduce the number of jobs and...

Wealth Shocks and Health Outcomes: Evidence from Stock Market Fluctuations

By Hannes Schwandt

American Economic Journal: Applied Economics, October 2018

Do wealth shocks affect the health of elderly in developed countries? I exploit the booms and busts in the US stock market as a natural experiment that generated considerable gains and losses in the wealth of stock-holding retirees. Using data from the 19...

Why Do Defaults Affect Behavior? Experimental Evidence from Afghanistan

By Joshua Blumenstock, Michael Callen, and Tarek Ghani

American Economic Review, October 2018

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 effec...

Skewed Wealth Distributions: Theory and Empirics

By Jess Benhabib and Alberto Bisin

Journal of Economic Literature, December 2018

Invariably across a cross-section of countries and time periods, wealth distributions are skewed to the right displaying thick upper tails, that is, large and slowly declining top wealth shares. In this survey we categorize the theoretical studies on th...

Understanding the Average Impact of Microcredit Expansions: A Bayesian Hierarchical Analysis of Seven Randomized Experiments

By Rachael Meager

American Economic Journal: Applied Economics, January 2019

Despite evidence from multiple randomized evaluations of microcredit, questions about external validity have impeded consensus on the results. I jointly estimate the average effect and the heterogeneity in effects across seven studies using Bayesian hiera...

Liquidity Constraint Tightness and Consumer Responses to Fiscal Stimulus Policy

By Claus Thustrup Kreiner, David Dreyer Lassen, and Søren Leth-Petersen

American Economic Journal: Economic Policy, February 2019

The marginal interest rate is the price at which a household can access additional liquidity. Consumption theory posits that variation in marginal interest rates across consumers predicts differences in the propensity to spend a stimulus payment. This hyp...

Prone to Fail: The Pre-crisis Financial System

[Symposium: Financial Stability Regulation]

By Darrell Duffie

Journal of Economic Perspectives, Winter 2019

The financial crisis that began in 2007 was triggered by over-leveraged homeowners and a severe downturn in US housing markets. However, a reasonably well-supervised financial system would have been much more resilient to this and other types of severe ...

How Do Individuals Repay Their Debt? The Balance-Matching Heuristic

By John Gathergood, Neale Mahoney, Neil Stewart, and Jörg Weber

American Economic Review, March 2019

We study how individuals repay their debt using linked data on multiple credit cards. Repayments are not allocated to the higher interest rate card, which would minimize the cost of borrowing. Moreover, the degree of misallocation is invariant to the econ...

Does Household Finance Matter? Small Financial Errors with Large Social Costs

By Harjoat S. Bhamra and Raman Uppal

American Economic Review, March 2019

Households with familiarity biases tilt their portfolios toward a few risky assets. The resulting mean-variance loss from portfolio underdiversification is equivalent to only a modest reduction of about 1 percent per year in a household's portfolio return...

Alcohol and Self-Control: A Field Experiment in India

By Frank Schilbach

American Economic Review, April 2019

This paper studies alcohol consumption among low-income workers in India. In a 3-week field experiment, the majority of 229 cycle-rickshaw drivers were willing to forgo substantial monetary payments in order to set incentives for themselves to remain sobe...

Failure to Launch: Housing, Debt Overhang, and the Inflation Option

By Aaron Hedlund

American Economic Journal: Macroeconomics, April 2019

Can inflating away nominal mortgage liabilities effectively combat recessions? I address this question using a model of illiquid housing, endogenous credit supply, and equilibrium default. I show that, in an ordinary recession, temporarily raising the inf...

Switching Costs and Competition in Retirement Investment

By Fernando Luco

American Economic Journal: Microeconomics, May 2019

How do different switching costs affect choices and competition in a private pension system? I answer this question in a setting in which variation in employment status allows me to identify two switching costs that jointly affect enrollees' decisions: th...

Student Loan Nudges: Experimental Evidence on Borrowing and Educational Attainment

By Benjamin M. Marx and Lesley J. Turner

American Economic Journal: Economic Policy, May 2019

We provide the first experimental evidence on the effect of student loans on educational attainment. Loan amounts listed in financial aid award letters ("offers") do not alter students' choice sets but significantly affect borrowing. Students randomly rec...

Are Home Buyers Inattentive? Evidence from Capitalization of Energy Costs

By Erica Myers

American Economic Journal: Economic Policy, May 2019

This paper explores whether home buyers are attentive to energy costs. The cost-effectiveness of market-based pollution policies crucially depends on whether consumers are attentive to energy costs when purchasing energy-using durables. I exploit energy-c...