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Getting to the Top of Mind: How Reminders Increase Saving

  • Dean Karlan

    ()

    (Economics Department, Yale University)

  • Margaret McConnell

    ()

    (Center for Population and Development Studies, Harvard University)

  • Sendhil Mullainathan

    ()

    (Department of Economics, Harvard University)

  • Jonathan Zinman

    ()

    (Department of Economics, Dartmouth College)

We develop and test a simple model of limited attention in intertemporal choice. The model posits that individuals fully attend to consumption in all periods but fail to attend to some future lumpy expenditure opportunities. This asymmetry generates some predictions that overlap with models of present-bias. Our model also generates the unique predictions that reminders may increase saving, and that reminders will be more effective when they increase the salience of a specific expenditure. We find support for these predictions in three field experiments that randomly assign reminders to new savings account holders.

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File URL: http://www.econ.yale.edu/growth_pdf/cdp988.pdf
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Paper provided by Economic Growth Center, Yale University in its series Working Papers with number 988.

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Length: 40 pages
Date of creation: Jul 2010
Date of revision:
Handle: RePEc:egc:wpaper:988
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  1. Richard H. Thaler & Shlomo Benartzi, 2004. "Save More Tomorrow (TM): Using Behavioral Economics to Increase Employee Saving," Journal of Political Economy, University of Chicago Press, vol. 112(S1), pages S164-S187, February.
  2. S. Dellavigna., 2011. "Psychology and Economics: Evidence from the Field," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 5.
  3. James J. Choi & David Laibson & Brigitte C. Madrian & Andrew Metrick, 2004. "For Better or for Worse: Default Effects and 401(k) Savings Behavior," NBER Chapters, in: Perspectives on the Economics of Aging, pages 81-126 National Bureau of Economic Research, Inc.
  4. David Laibson, 2001. "A Cue-Theory of Consumption," The Quarterly Journal of Economics, Oxford University Press, vol. 116(1), pages 81-119.
  5. Drew Fudenberg & David K Levine, 2005. "A Dual Self Model of Impulse Control," Levine's Working Paper Archive 618897000000000876, David K. Levine.
  6. Sendhil Mullainathan, 2002. "A Memory-Based Model of Bounded Rationality," The Quarterly Journal of Economics, Oxford University Press, vol. 117(3), pages 735-774.
  7. Raj Chetty & Adam Looney & Kory Kroft, 2009. "Salience and taxation: theory and evidence," Finance and Economics Discussion Series 2009-11, Board of Governors of the Federal Reserve System (U.S.).
  8. John Beshears & James J. Choi & David Laibson & Brigitte C. Madrian, 2006. "The Importance of Default Options for Retirement Savings Outcomes: Evidence from the United States," NBER Working Papers 12009, National Bureau of Economic Research, Inc.
  9. Nava Ashraf & Dean Karlan & Wesley Yin, 2006. "Tying Odysseus to the Mast: Evidence From a Commitment Savings Product in the Philippines," The Quarterly Journal of Economics, Oxford University Press, vol. 121(2), pages 635-672.
  10. Ball, Laurence & Gregory Mankiw, N. & Reis, Ricardo, 2005. "Monetary policy for inattentive economies," Journal of Monetary Economics, Elsevier, vol. 52(4), pages 703-725, May.
  11. Dean Karlan & Nava Ashaf & Wesley Yin, 2006. "Tying odysseus to the mast: Evidence from a commitment savings product in the philippines," Natural Field Experiments 00206, The Field Experiments Website.
  12. Laibson, David I., 1997. "Golden Eggs and Hyperbolic Discounting," Scholarly Articles 4481499, Harvard University Department of Economics.
  13. Richard Thaler & Shlomo Benartzi, 2004. "Save more tomorrow: Using behavioral economics to increase employee saving," Natural Field Experiments 00337, The Field Experiments Website.
  14. N. Gregory Mankiw & Ricardo Reis, 2001. "Sticky information versus sticky prices: a proposal to replace the New-Keynesian Phillips curve," Proceedings, Federal Reserve Bank of San Francisco, issue Jun.
  15. Pascaline Dupas & Jonathan Robinson, 2009. "Savings Constraints and Microenterprise Development: Evidence from a Field Experiment in Kenya," NBER Working Papers 14693, National Bureau of Economic Research, Inc.
  16. David Laibson & Andrea Repetto & Jeremy Tobacman, 2007. "Estimating Discount Functions with Consumption Choices over the Lifecycle," Documentos de Trabajo 236, Centro de Economía Aplicada, Universidad de Chile.
  17. Nava Ashraf & Dean Karlan & Wesley Yin, 2005. "Deposit Collectors," Working Papers 930, Economic Growth Center, Yale University.
  18. Laibson, David I. & Gabaix, Xavier, 2006. "Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets," Scholarly Articles 4554333, Harvard University Department of Economics.
  19. Faruk Gul & Wolfgang Pesendorfer, 2004. "Self-Control and the Theory of Consumption," Econometrica, Econometric Society, vol. 72(1), pages 119-158, 01.
  20. Esther Duflo & Michael Kremer & Jonathan Robinson, 2011. "Nudging Farmers to Use Fertilizer: Theory and Experimental Evidence from Kenya," American Economic Review, American Economic Association, vol. 101(6), pages 2350-90, October.
  21. Sims, Christopher A., 2003. "Implications of rational inattention," Journal of Monetary Economics, Elsevier, vol. 50(3), pages 665-690, April.
  22. Thaler, Richard H, 1990. "Saving, Fungibility, and Mental Accounts," Journal of Economic Perspectives, American Economic Association, vol. 4(1), pages 193-205, Winter.
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