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The Role Of Information And Social Interactions In Retirement Plan Decisions: Evidence From A Randomized Experiment

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  • Esther Duflo
  • Emmanuel Saez

Abstract

This paper analyzes a randomized experiment to shed light on the role of information and social interactions in employees' decisions to enroll in a Tax Deferred Account (TDA) retirement plan within a large university. The experiment encouraged a random sample of employees in a subset of departments to attend a benefits information fair organized by the university, by promising a monetary reward for attendance. The experiment multiplied by more than five the attendance rate of these treated individuals (relative to controls), and tripled that of untreated individuals within departments where some individuals were treated. TDA enrollment five and eleven months after the fair was significantly higher in departments where some individuals were treated than in departments where nobody was treated. However, the effect on TDA enrollment is almost as large for individuals in treated departments who did not receive the encouragement as for those who did. We provide three interpretations-differential treatment effects, social network effects, and motivational reward effects-to account for these results. © 2001 the President and Fellows of Harvard College and the Massachusetts Institute of Technology

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Bibliographic Info

Article provided by MIT Press in its journal The Quarterly Journal of Economics.

Volume (Year): 118 (2003)
Issue (Month): 3 (August)
Pages: 815-842

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Handle: RePEc:tpr:qjecon:v:118:y:2003:i:3:p:815-842

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Web page: http://mitpress.mit.edu/journals/

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  1. B. Douglas Bernheim & Daniel M. Garrett, 1996. "The Determinants and Consequences of Financial Education in the Workplace: Evidence from a Survey of Households," NBER Working Papers 5667, National Bureau of Economic Research, Inc.
  2. Patrick J. Bayer & B. Douglas Bernheim & John Karl Scholz, 2009. "The Effects Of Financial Education In The Workplace: Evidence From A Survey Of Employers," Economic Inquiry, Western Economic Association International, vol. 47(4), pages 605-624, October.
  3. Foster, Andrew D & Rosenzweig, Mark R, 1995. "Learning by Doing and Learning from Others: Human Capital and Technical Change in Agriculture," Journal of Political Economy, University of Chicago Press, vol. 103(6), pages 1176-1209, December.
  4. Esther Duflo & Emmanuel Saez, 2000. "Participation and Investment Decisions in a Retirement Plan: The Influence of Colleagues' Choices," NBER Working Papers 7735, National Bureau of Economic Research, Inc.
  5. James M. Poterba & Steven F. Venti & David A. Wise, 1996. "How Retirement Saving Programs Increase Saving," Journal of Economic Perspectives, American Economic Association, vol. 10(4), pages 91-112, Fall.
  6. Sushil Bikhchandani & David Hirshleifer & Ivo Welch, 2010. "A theory of Fads, Fashion, Custom and cultural change as informational Cascades," Levine's Working Paper Archive 1193, David K. Levine.
  7. Banerjee, Abhijit V, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 797-817, August.
  8. Lawrence F. Katz & Jeffrey R. Kling & Jeffrey B. Liebman, 2000. "Moving to Opportunity in Boston: Early Results of a Randomized Mobility Experiment," NBER Working Papers 7973, National Bureau of Economic Research, Inc.
  9. Edward Miguel & Michael Kremer, 2001. "Worms: Education and Health Externalities in Kenya," NBER Working Papers 8481, National Bureau of Economic Research, Inc.
  10. Brigitte C. Madrian & Dennis F. Shea, 2000. "The Power of Suggestion: Inertia in 401(k) Participation and Savings Behavior," NBER Working Papers 7682, National Bureau of Economic Research, Inc.
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