IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Mobile-izing Savings with Automatic Contributions: Experimental Evidence on Present Bias and Default Effects in Afghanistan

Listed author(s):
  • Blumenstock, Joshua
  • Callen, Michael
  • Ghani, Tarek

Through a field experiment in Afghanistan, we show that default enrollment in a defined contribution plan increases saving rates by 40 percentage points, and that present-biased preferences mainly drive this effect. Working with Afghanistan's primary mobile phone operator, we designed and deployed a new mobile phone-based automatic payroll deduction system. Each of 967 employees at the firm was randomly assigned a default contribution rate (either 0% or 5%) as well as a matching incentive rate (0%, 25%, or 50%). We find that employees initially assigned a default contribution rate of 5% are 40 percentage points more likely to contribute to the account 6 months later than individuals assigned to a default contribution rate of zero; to achieve this effect through financial incentives alone would require a 50% match from the employer. We also find evidence of habit formation: default enrollment increases the likelihood that employees continue to save after end of the trial, and increases employees' self-reported interest in saving and sense of financial security. To understand the mechanism behind these effects, we conducted several experimental interventions and measured employee time preferences. Ruling out several competing explanations, we find evidence that the default effect is driven largely by present-biased preferences that cause the employee to procrastinate in making a non-default election.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=11400
Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 11400.

as
in new window

Length:
Date of creation: Jul 2016
Handle: RePEc:cpr:ceprdp:11400
Contact details of provider: Postal:
Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.

Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820

Order Information: Email:


References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as
in new window


  1. Abadie, Alberto & Gay, Sebastien, 2006. "The impact of presumed consent legislation on cadaveric organ donation: A cross-country study," Journal of Health Economics, Elsevier, vol. 25(4), pages 599-620, July.
  2. John List & Azeem Shaikh & Yang Xu, 2016. "Multiple Hypothesis Testing in Experimental Economics," Artefactual Field Experiments 00402, The Field Experiments Website.
  3. Nava Ashraf, 2009. "Spousal Control and Intra-household Decision Making: An Experimental Study in the Philippines," American Economic Review, American Economic Association, vol. 99(4), pages 1245-1277, September.
  4. Thaler, Richard H & Shefrin, H M, 1981. "An Economic Theory of Self-Control," Journal of Political Economy, University of Chicago Press, vol. 89(2), pages 392-406, April.
  5. Michael Callen & Suresh De Mel & Craig McIntosh & Christopher Woodruff, 2014. "What are the Headwaters of Formal Savings? Experimental Evidence from Sri Lanka," NBER Working Papers 20736, National Bureau of Economic Research, Inc.
  6. Raj Chetty & John N. Friedman & Søren Leth-Petersen & Torben Heien Nielsen & Tore Olsen, 2014. "Active vs. Passive Decisions and Crowd-Out in Retirement Savings Accounts: Evidence from Denmark," The Quarterly Journal of Economics, Oxford University Press, vol. 129(3), pages 1141-1219.
  7. Andrew Caplin & Daniel J. Martin, 2012. "Defaults and Attention: The Drop Out Effect," NBER Working Papers 17988, National Bureau of Economic Research, Inc.
  8. Gopi Shah Goda & Matthew R. Levy & Colleen Flaherty Manchester & Aaron Sojourner & Joshua Tasoff, 2015. "The Role of Time Preferences and Exponential-Growth Bias in Retirement Savings," NBER Working Papers 21482, National Bureau of Economic Research, Inc.
  9. Edward Miguel & Michael Kremer, 2004. "Worms: Identifying Impacts on Education and Health in the Presence of Treatment Externalities," Econometrica, Econometric Society, vol. 72(1), pages 159-217, 01.
  10. Brigitte C. Madrian, 2012. "Matching Contributions and Savings Outcomes: A Behavioral Economics Perspective," NBER Working Papers 18220, National Bureau of Economic Research, Inc.
  11. Demirguc-Kunt,Asli & Klapper,Leora & Singer,Dorothe & Van Oudheusden,Peter, 2015. "The Global Findex Database 2014 : measuring financial inclusion around the world," Policy Research Working Paper Series 7255, The World Bank.
  12. 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.
  13. B. Douglas Bernheim & Andrey Fradkin & Igor Popov, 2015. "The Welfare Economics of Default Options in 401(k) Plans," American Economic Review, American Economic Association, vol. 105(9), pages 2798-2837, September.
  14. Simone Schaner, 2015. "Do Opposites Detract? Intrahousehold Preference Heterogeneity and Inefficient Strategic Savings," American Economic Journal: Applied Economics, American Economic Association, vol. 7(2), pages 135-174, April.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:11400. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.