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Do Economic Policymakers Practice what they Preach? The Case of Pension Decisions

  • Momi Dahan
  • Tehila Kogut
  • Moshe Shalem

This paper examines whether policymakers, economists at the Israeli Finance Ministry, act in their personal pension decisions in accordance with the rational behaviour assumptions underlying the pension policies they advance. We find that while economists' decisions regarding three other important decisions such as buying an apartment, a car and a large appliance, are largely in line with rational models, pension decisions deviate significantly from these models. A large share of these policymakers hardly search for relevant information regarding their chosen pension fund, do not know the most necessary information and consider only one option before choosing the preferred pension fund. A significant difference was found between specialized policymakers (economists in the Pension Division) and general policymakers (economists in all other Divisions) showing that specialized policymakers are significantly less biased.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2009/wp-cesifo-2009-09/cesifo1_wp2783.pdf
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2783.

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Date of creation: 2009
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Handle: RePEc:ces:ceswps:_2783
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  1. James J. Choi & David Laibson & Brigitte C. Madrian & Andrew Metrick, 2002. "For Better or For Worse: Default Effects and 401(k) Savings Behavior," JCPR Working Papers 256, Northwestern University/University of Chicago Joint Center for Poverty Research.
  2. Shlomo Benartzi & Richard Thaler, 2007. "Heuristics and Biases in Retirement Savings Behavior," Journal of Economic Perspectives, American Economic Association, vol. 21(3), pages 81-104, Summer.
  3. James J. Choi & David Laibson & Brigitte C. Madrian & Andrew Metrick, 2002. "Defined Contribution Pensions: Plan Rules, Participant Decisions, and the Path of Least Resistance," JCPR Working Papers 257, Northwestern University/University of Chicago Joint Center for Poverty Research.
  4. Tehila Kogut & Momi Dahan, 2012. "Do you look forward to retirement? Motivational biases in pension decisions," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 7(3), pages 282-291, May.
  5. T.K. Das, 1999. "Cognitive Biases and Strategic Decision Processes: An Integrative Perspective," Journal of Management Studies, Wiley Blackwell, vol. 36(6), pages 757-778, November.
  6. Bettman, James R & Sujan, Mita, 1987. " Effects of Framing on Evaluation of Comparable and Noncomparable Alternatives by Expert and Novice Consumers," Journal of Consumer Research, University of Chicago Press, vol. 14(2), pages 141-54, September.
  7. Mitchell, Olivia S. & Utkus, Stephen P. (ed.), 2004. "Pension Design and Structure: New Lessons from Behavioral Finance," OUP Catalogue, Oxford University Press, number 9780199273393, March.
  8. Shanteau, James, 1992. "Competence in experts: The role of task characteristics," Organizational Behavior and Human Decision Processes, Elsevier, vol. 53(2), pages 252-266, November.
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