Predicting Retirement Savings Using Survey Measures of Exponential-Growth Bias and Present Bias
Matthew R. Levy (),
Colleen Flaherty Manchester (),
Aaron Sojourner () and
Joshua Tasoff ()
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Matthew R. Levy: London School of Economics
Colleen Flaherty Manchester: University of Minnesota
Joshua Tasoff: Claremont Graduate University
No 11762, IZA Discussion Papers from Institute of Labor Economics (IZA)
In a nationally-representative sample, we predict retirement savings using survey-based elicitations of exponential-growth bias (EGB) and present bias (PB). We find that EGB, the tendency to neglect compounding, and PB, the tendency to value the present over the future, are highly significant and economically meaningful predictors of retirement savings. These relationships hold controlling for cognitive ability, financial literacy, and a rich set of demographic controls. We address measurement error as a potential confound and explore mechanisms through which these biases may operate. Back of the envelope calculations suggest that eliminating EGB and PB would increase retirement savings by approximately 12 percent.
Keywords: survey-based elicitations; financial literacy; present bias; quasi-hyperbolic discounting; exponential-growth bias; retirement savings; household finance (search for similar items in EconPapers)
JEL-codes: D91 J26 D14 D15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-age and nep-fle
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Published in: Economic Inquiry, 2019, 57 (3), 1636 - 1658 https://doi.org/10.1111/ecin.12792
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Journal Article: PREDICTING RETIREMENT SAVINGS USING SURVEY MEASURES OF EXPONENTIAL‐GROWTH BIAS AND PRESENT BIAS (2019)
Working Paper: Predicting Retirement Savings Using Survey Measures of Exponential-Growth Bias and Present Bias (2018)
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