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Why Do Defaults Affect Behavior? Experimental Evidence from Afghanistan

Joshua Blumenstock, Michael Callen and Tarek Ghani

No 23590, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: D14 D15 D9 O1 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-exp
Date: 2017-07
Note: DEV
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Published as Joshua Blumenstock & Michael Callen & Tarek Ghani, 2018. "Why Do Defaults Affect Behavior? Experimental Evidence from Afghanistan," American Economic Review, vol 108(10), pages 2868-2901.

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