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Information, Preferences, and Public Benefit Participation: Experimental Evidence from the Advance EITC and 401(k) Savings

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  • Damon Jones

Abstract

Within a field experiment, I present a treatment group with reductions in information, administrative, stigma, and procrastination costs associated with the Advance EITC. The treatment increases Advance participation from 0.3 to 1.2 percent. Another treatment simultaneously encourages 401(k) savings, increasing 401(k) participation from 46 to 50 percent. However, there is no additional increase in Advance participation when coupled with the 401(k) treatment, casting doubt on a long-term forced savings motive. The results indicate that EITC recipients actively forgo the Advance. Further work is needed to identify what underlies these preferences. Possible explanations include uncertainty and/or short-term forced savings motives. (JEL D14, D82, H23, H24, H31)

Suggested Citation

  • Damon Jones, 2010. "Information, Preferences, and Public Benefit Participation: Experimental Evidence from the Advance EITC and 401(k) Savings," American Economic Journal: Applied Economics, American Economic Association, vol. 2(2), pages 147-163, April.
  • Handle: RePEc:aea:aejapp:v:2:y:2010:i:2:p:147-63
    Note: DOI: 10.1257/app.2.2.147
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    References listed on IDEAS

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    1. Jennifer L. Romich & Thomas Weisner, 2000. "How Families View and Use the EITC: Advanced Payment versus Lump-sum Delivery," JCPR Working Papers 138, Northwestern University/University of Chicago Joint Center for Poverty Research.
    2. Sherrie L. W. Rhine & Sabrina Su & Yazmin Osaki & Steven Lee, 2005. "Householder response to the earned income tax credit: path of sustenance or road to asset building," Proceedings 957, Federal Reserve Bank of Chicago.
    3. Romich, Jennifer L. & Weisner, Thomas, 2000. "How Families View and Use the EITC: Advance Payment Versus Lump Sum Delivery," National Tax Journal, National Tax Association, vol. 53(4), pages 1245-1266, December.
    4. Laurence J. Kotlikoff & David Rapson, 2007. "Does It Pay, at the Margin, to Work and Save? Measuring Effective Marginal Taxes on Americans' Labor Supply and Saving," NBER Chapters,in: Tax Policy and the Economy, Volume 21, pages 83-144 National Bureau of Economic Research, Inc.
    5. Daniel Feenberg & Elisabeth Coutts, 1993. "An introduction to the TAXSIM model," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 12(1), pages 189-194.
    6. David Laibson, 1997. "Golden Eggs and Hyperbolic Discounting," The Quarterly Journal of Economics, Oxford University Press, vol. 112(2), pages 443-478.
    7. Nicholas S. Souleles, 1999. "The Response of Household Consumption to Income Tax Refunds," American Economic Review, American Economic Association, vol. 89(4), pages 947-958, September.
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    Citations

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    Cited by:

    1. Damon Jones, 2012. "Inertia and Overwithholding: Explaining the Prevalence of Income Tax Refunds," American Economic Journal: Economic Policy, American Economic Association, vol. 4(1), pages 158-185, February.
    2. Beshears, John & Choi, James J. & Laibson, David & Madrian, Brigitte C., 2017. "Does front-loading taxation increase savings? Evidence from Roth 401(k) introductions," Journal of Public Economics, Elsevier, vol. 151(C), pages 84-95.
    3. Peters, Jörg & Langbein, Jörg & Roberts, Gareth, 2016. "Policy evaluation, randomized controlled trials, and external validity—A systematic review," Economics Letters, Elsevier, vol. 147(C), pages 51-54.
    4. Blaufus, Kay & Milde, Michael, 2018. "Learning to save tax-efficiently: Tax misperceptions and the effect of informational tax nudges on retirement savings," arqus Discussion Papers in Quantitative Tax Research 225, arqus - Arbeitskreis Quantitative Steuerlehre.
    5. Kosonen, Tuomas & Ropponen, Olli, 2015. "The role of information in tax compliance: Evidence from a natural field experiment," Economics Letters, Elsevier, vol. 129(C), pages 18-21.
    6. Damon Jones & Aprajit Mahajan, 2015. "Time-Inconsistency and Saving: Experimental Evidence from Low-Income Tax Filers," NBER Working Papers 21272, National Bureau of Economic Research, Inc.
    7. Belot, Michèle & James, Jonathan, 2016. "Partner selection into policy relevant field experiments," Journal of Economic Behavior & Organization, Elsevier, vol. 123(C), pages 31-56.
    8. Sylvain Chareyron & David Gray & Yannick L'Horty, 2017. "Raising the take-up of social assistance benefits through a simple mailing: evidence from a French field experiment," TEPP Working Paper 2017-01, TEPP.
    9. Carol Osler & Thang Nguyen & Tanseli Savaser, 2011. "Asymmetric Information and the Foreign-Exchange Trades of Global Custody Banks," Department of Economics Working Papers 2011-09, Department of Economics, Williams College.
    10. Julie Janssens & Natascha Van Mechelen, 2017. "Who is to Blame? An Overview of the Factors Contributing to the Non-Take-Up of Social Rights," Working Papers 1708, Herman Deleeck Centre for Social Policy, University of Antwerp.
    11. Hilary Hoynes & Jesse Rothstein, 2016. "Tax Policy Toward Low-Income Families," NBER Working Papers 22080, National Bureau of Economic Research, Inc.
    12. Jeehoon Han, 2016. "SNAP Expansions and Participation in Government Safety Net Programs," 2016 Papers pha1139, Job Market Papers.

    More about this item

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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