Work

Why Do Defaults Affect Behavior? Experimental Evidence from Afghanistan

Year: 2018

Type: article

Study designs: Randomized Controlled Trial, Clinical Trial

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 percent 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 C93, D14, D91, O12)

Source: American Economic Review

DOI: 10.1257/aer.20171676

Authors: Joshua Blumenstock, Michael Callen, Tarek Ghani

Institutions: University of California, Berkeley, University of California San Diego, Washington University in St. Louis

Language: English

Topic: Decision-Making and Behavioral Economics

Subfield: General Decision Sciences

Field: Decision Sciences

Domain: Social Sciences

Open Access status: bronze