Why do defaults affect behavior? Experimental evidence from Afghanistan

Blumenstock, Joshua, Callen, Mike and Ghani, Tarek (2018) Why do defaults affect behavior? Experimental evidence from Afghanistan. American Economic Review, 108 (10). 2868 – 2901. ISSN 0002-8282

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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.

Item Type:	Article
Official URL:	https://www.aeaweb.org/journals/aer
Additional Information:	© 2019 American Economic Association
Divisions:	Economics
Subjects:	H Social Sciences > HB Economic Theory H Social Sciences > HG Finance T Technology > T Technology (General)
JEL classification:	D - Microeconomics > D1 - Household Behavior and Family Economics > D14 - Personal Finance
Date Deposited:	13 Dec 2019 11:00
Last Modified:	16 Apr 2024 20:48
URI:	http://eprints.lse.ac.uk/id/eprint/102899

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