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Efficiency in Household Decision Making: Evidence from the Retirement Savings of U.S. Couples

Author

Listed:
  • Taha Choukhmane
  • Lucas Goodman
  • Cormac O'Dea

Abstract

Pareto Efficiency is a core assumption of most models of household decision-making. We test this assumption using a new dataset covering the retirement saving contributions of over a million U.S. individuals. While a vast literature has failed to reject household efficiency in developed countries, we find evidence of widespread inefficiency in our setting: retirement contributions are not allocated to the account of the spouse with the highest employer match rate. This lack of coordination cannot be explained by inertia, auto-enrollment, or simple heuristics. Instead, we find that indicators of weaker marital commitment correlate with the incidence of inefficient allocations.

Suggested Citation

  • Taha Choukhmane & Lucas Goodman & Cormac O'Dea, 2023. "Efficiency in Household Decision Making: Evidence from the Retirement Savings of U.S. Couples," NBER Working Papers 31195, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:31195
    Note: AG PE
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    Cited by:

    1. Derby, Elena & Mackie, Kathleen & Mortenson, Jacob, 2023. "Worker and spousal responses to automatic enrollment," Journal of Public Economics, Elsevier, vol. 223(C).

    More about this item

    JEL classification:

    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • D19 - Microeconomics - - Household Behavior - - - Other
    • J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure

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