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Why do defaults affect behavior? Experimental evidence from Afghanistan

Joshua Blumenstock, Mike Callen and Tarek Ghani

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We report on an experiment examining why default options impact behavior. By randomly assigning employees to different varieties of a salary-linked savings account, we find that default enrollment increases participation by 40 percentage points—an effect equivalent to providing a 50% matching incentive. We then use a series of experimental interventions to differentiate between explanations for the default effect, which we conclude is driven largely by present-biased preferences and the cognitive cost of thinking through different savings scenarios. Default assignment also changes employees' attitudes toward saving, and makes them more likely to actively decide to save after the study concludes.

Keywords: defaults savings; behavioral models; peer effects; digital finance; mobile money (search for similar items in EconPapers)
JEL-codes: D14 (search for similar items in EconPapers)
Pages: 99 pages
Date: 2018-10-01
New Economics Papers: this item is included in nep-exp and nep-mfd
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Citations: View citations in EconPapers (7) Track citations by RSS feed

Published in American Economic Review, 1, October, 2018, 108(10), pp. 2868 – 2901. ISSN: 0002-8282

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http://eprints.lse.ac.uk/102899/ Open access version. (application/pdf)

Related works:
Journal Article: Why Do Defaults Affect Behavior? Experimental Evidence from Afghanistan (2018) Downloads
Working Paper: Why Do Defaults Affect Behavior? Experimental Evidence from Afghanistan (2017) Downloads
Working Paper: Why Do Defaults Affect Behavior? Experimental Evidence from Afghanistan (2017) Downloads
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