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- Title
PREDICTING RETIREMENT SAVINGS USING SURVEY MEASURES OF EXPONENTIAL‐GROWTH BIAS AND PRESENT BIAS.
- Authors
Goda, Gopi Shah; Levy, Matthew; Manchester, Colleen Flaherty; Sojourner, Aaron; Tasoff, Joshua
- Abstract
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%.
- Subjects
INDIVIDUAL retirement accounts; RETIREMENT income; EXPONENTIAL functions; COGNITIVE ability; FINANCIAL literacy
- Publication
Economic Inquiry, 2019, Vol 57, Issue 3, p1636
- ISSN
0095-2583
- Publication type
Article
- DOI
10.1111/ecin.12792