Long term savings decisions: Financial reform, peer effects and ethnicity

Yevgeny Mugerman, Orly Sade and Moses Shayo

Journal of Economic Behavior & Organization, 2014, vol. 106, issue C, 235-253

Abstract: In 2005, a drastic reform in the Israeli capital market shifted the power to choose savings vehicles from employers to individuals. Using a unique dataset from a large employer, this event provides us a rare window into individuals’ savings decisions and the effect of their social environment. In the first year following the reform's implementation, 7% of the employees switched out of the fund in which they all previously saved. Choice of fund was not associated with observable measures of fund performance, but was strongly affected by the employees’ social environment. Exploiting within-department variation in peer groups, we find that savings decisions were strongly influenced by the choices of co-workers from the same ethnic group. Interviews also point to the influence of non-professional colleagues.

Keywords: Financial reform; Savings decisions; Peer effects (search for similar items in EconPapers)
JEL-codes: D14 G11 G14 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (25)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:106:y:2014:i:c:p:235-253

DOI: 10.1016/j.jebo.2014.07.002

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