Switching Costs and Competition in Retirement Investment

Fernando Luco

American Economic Journal: Microeconomics, 2019, vol. 11, issue 2, 26-54

Abstract: How do different switching costs affect choices and competition in a private pension system? I answer this question in a setting in which variation in employment status allows me to identify two switching costs that jointly affect enrollees' decisions: the cost of evaluating financial information and the cost of the bureaucratic process that enrollees must navigate when switching. I use this variation to estimate the different switching costs and study their impact on competition among pension funds. I find that though eliminating all switching costs decreases equilibrium fees the most, eliminating either switching cost decreases fees significantly.

JEL-codes: D14 G23 J26 J32 O15 (search for similar items in EconPapers)
Date: 2019
Note: DOI: 10.1257/mic.20160332
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