scholarly journals The Welfare Economics of Default Options in 401(k) Plans

2015 ◽  
Vol 105 (9) ◽  
pp. 2798-2837 ◽  
Author(s):  
B. Douglas Bernheim ◽  
Andrey Fradkin ◽  
Igor Popov
Keyword(s):  
Behavioral Model ◽  
Welfare Economics ◽  
Welfare Effects ◽  
Pension Plans ◽  
Contribution Rate ◽  
Opt Out ◽  
Default Options

Default contribution rates for 401(k) pension plans powerfully influence choices. Potential causes include opt-out costs, procrastination, inattention, and psychological anchoring. Using realistically parameterized models, we show how the optimal default, the magnitude of the welfare effects, and the degree of normative ambiguity depend on the behavioral model, the scope of the choice domain deemed welfare-relevant, the use of penalties for passive choice, and other 401(k) plan features. While results are theory-specific, our analysis provides reasonably robust justifications for setting the default either at the highest contribution rate matched by the employer or—contrary to common wisdom—at zero. (JEL D14, D91, J26, J32)

scholarly journals Default options: a powerful behavioral tool to increase COVID-19 contact tracing app acceptance in Latin America?

2021 ◽  
pp. 1-17
Author(s):  
Cynthia Boruchowicz ◽  
Florencia Lopez Boo ◽  
Benjamin Roseth ◽  
Luis Tejerina
Keyword(s):  
Latin America ◽  
The United States ◽  
Contact Tracing ◽  
Phone Survey ◽  
Opt Out ◽  
Default Options ◽  
Nationally Representative ◽  
The Government ◽  
Financial Transactions ◽  
Shed Light

Abstract Given the rates of transmission of COVID-19, relying only on manual contact tracing might be infeasible to control the epidemic without sustained costly lockdowns or rapid vaccination efforts. In the first study of its kind in Latin America, we find through a phone survey of a nationally representative sample of ten countries that an opt-out regime (automatic installation) increases self-reported intention to accept a contact tracing app with exposure notification by 22 percentage points compared to an opt-in regime (voluntary installation). This effect is triple the size and of opposite sign of the effect found in Europe and the United States, potentially due to lower concerns regarding privacy and lower levels of interpersonal trust. We see that an opt-out regime is more effective in increasing willingness to accept for those who do not trust the government or do not use their smartphones for financial transactions. The local severity of the pandemic does not affect our results, but feeling personally at risk increases intent to accept such apps in general. These results can shed light on the use of default options not only for contact tracing apps but in public health overall in the context of a pandemic in Latin America.

Migration: The Welfare Calculus of Immigrant Countries / Wanderung: Das Wohlfahrtskalkül eines Einwanderungslandes

1995 ◽  
Vol 214 (3) ◽  
Author(s):  
Hugo Dicke ◽  
Hans H. Glismann
Keyword(s):  
International Trade ◽  
Recipient Country ◽  
Migration Policy ◽  
Welfare Economics ◽  
Welfare Effects ◽  
Labour Markets ◽  
Resource Base ◽  
Preference Patterns ◽  
National Resource

SummaryThe welfare calculus of migration of the recipient country is tackled at the level of macro- and of microeconomics, using the technical apparatus of the welfare economics of international trade. It turns out that - as opposed to the international-trade case - in order to exploit positive welfare effects accruing to an economy which opens its labour markets to immigrants, interventions are necessary. The design of migration policy has to take into account, among others, the degree of homogeneity of preference patterns as well as the functioning of regulated labour markets, and the strain on the national resource base.

Optimal Default Options: The Case for Opt-Out Minimization

2020 ◽  
Author(s):  
B. Douglas Bernheim ◽  
Jonas Mueller Gastell
Keyword(s):  
Opt Out ◽  
Default Options

scholarly journals A DC Scheme to Maximize the Benefits of the Public Sector Employees Based on Behavioral Finance

2021 ◽  
Vol 3 (2) ◽  
pp. 44
Author(s):  
Yueling Zhao
Keyword(s):  
Behavioral Finance ◽  
Questionnaire Survey ◽  
Pension Plans ◽  
Risk Tolerance ◽  
Automatic Registration ◽  
Contribution Rate ◽  
The Public ◽  
Tolerance Level ◽  
Investment Choice ◽  
Public Sector Employees

This paper introduces DB and DC pension plans, reviews the literature of DC pension plans, and puts forward three application strategies: automatic registration default contribution rate and annual automatic growth contribution rate, the risk tolerance level of different employees was evaluated by questionnaire survey, and individual investment choice of employees with different risk tolerance.

Optimal Default Options: The Case for Opt-Out Minimization

2020 ◽  
Author(s):  
B. Douglas Bernheim ◽  
Jonas Mueller Gastell
Keyword(s):  
Opt Out ◽  
Default Options

Default Options: A Powerful Behavioral Tool to Increase COVID-19 Contact Tracing App Acceptance in Latin America?

2020 ◽  
Author(s):  
Cynthia Boruchowicz ◽  
Florencia López Bóo ◽  
Benjamin Roseth ◽  
Luis Tejerina
Keyword(s):  
Latin America ◽  
Opposite Sign ◽  
The United States ◽  
Contact Tracing ◽  
Opt Out ◽  
Default Options ◽  
Nationally Representative ◽  
Financial Transactions ◽  
And Control ◽  
Shed Light

Being able to follow the chain of contagion of COVID-19 is important to help save lives and control the epidemic without sustained costly lockdowns. This is especially relevant in Latin America, where economic contractions have already been the largest in the regions history. Given the high rates of transmission of COVID-19, relying only in manual contact tracing might be infeasible. Acceptability and uptake of contact tracing apps with exposure notifications is key for the implementation the “test, trace and treat” triad. In the first study of its kind in Latin America, we find that for a nationally representative sample of 10 countries, an opt-out regime with automatic installation significantly increases the probability of acceptance of such apps in almost 22 p.p. compared to an opt-in regime with voluntary installation. This triples the size and is of opposite sign of the effect found in Europe and the United States. We see that an opt-out regime is more effective in increasing acceptability in South America compared to Central America and Mexico; for those who claim not to trust the national government; and for those who do not use their smartphones for financial transactions. The severity of the pandemic at the place of residence does not seem to affect the effectiveness of the opt-out regime versus an opt-in one, but feeling personally at risk does increase the willingness to accept contact tracing apps with exposure notifications in general. These results can shed light on the use of default options in public health in the context of a pandemic in Latin America.

Earning and Conversion Handicaps and the Welfare Economics of Disability

2008 ◽  
Vol 3 (2) ◽  
pp. 61-67
Author(s):  
Luke B. Connelly
Keyword(s):  
People With Disabilities ◽  
Welfare Economics ◽  
Welfare Effects ◽  
Type Model ◽  
Social Policies ◽  
Economic Basis ◽  
Welfare Implications

AbstractSen (2004) has distinguished between two types of handicap that are commonly associated with disabilities, viz. an ‘earning handicap’ and a ‘conversion handicap’. In this article, these concepts are considered, extended, and developed conceptually within the framework of a Grossman-type model. This model is then used to consider how the welfare implications of disability and the attendant handicaps may be conceived. A utilitarian framework of the kind associated with conventional welfare economics is invoked, but extra-welfarist-type policies are also discussed. The article shows how the concepts of disability and handicap may be given a tractable conceptual economic basis, and how the welfare effects of social policies towards people with disabilities can usefully be analysed within the resulting framework.

scholarly journals DEFAULT EFFECTS AND FOLLOW-ON BEHAVIOR: EVIDENCE FROM AN ELECTRICITY PRICING PROGRAM

2021 ◽  
Author(s):  
Meredith Fowlie ◽  
Catherine Wolfram ◽  
Patrick Baylis ◽  
C Anna Spurlock ◽  
Annika Todd-Blick ◽  
...  
Keyword(s):  
Large Scale ◽  
Controlled Trial ◽  
Electricity Consumption ◽  
Welfare Effects ◽  
Time Varying ◽  
Program Participation ◽  
Electricity Pricing ◽  
Randomized Controlled ◽  
Opt Out ◽  
Residential Electricity

Abstract We study default effects in the context of a residential electricity-pricing program. We analyze a large-scale randomized controlled trial in which one treatment group was given the option to opt-in to time-varying pricing while another was defaulted into the program but allowed to opt-out. We provide dramatic evidence of a default effect on program participation, consistent with previous research. A novel feature of our study is that we also observe how the default manipulation impacts customers’ subsequent electricity consumption. Passive consumers who did not opt-out but would not have opted in — comprising more than 70 percent of the sample — nonetheless reduce consumption in response to higher prices. Observation of this follow-on behavior enables us to assess competing explanations for the default effect. We draw conclusions about the likely welfare effects of defaulting customers onto time-varying pricing.

Optimal funding of defined benefit pension plans

2010 ◽  
Vol 10 (1) ◽  
pp. 31-52 ◽  
Author(s):  
DONATIEN HAINAUT ◽  
GRISELDA DEELSTRA
Keyword(s):  
Dynamic Programming ◽  
Interest Rates ◽  
Pension Fund ◽  
Jump Process ◽  
Pension Plans ◽  
Budget Constraint ◽  
Defined Benefit ◽  
Contribution Rate ◽  
Terminal Wealth ◽  
Current Asset

AbstractIn this paper, we address the issue of determining the optimal contribution rate of a defined benefit pension fund. The affiliate's mortality is modelled by a jump process and the benefits paid at retirement are function of the evolution of future salaries. Assets of the fund are invested in cash, stocks, and a rolling bond. Interest rates are driven by a Vasicek model. The objective is to minimize both the quadratic spread between the contribution rate and the normal cost, and the quadratic spread between the terminal wealth and the mathematical reserve required to cover benefits. The optimization is done under a budget constraint that guarantees the actuarial equilibrium between the current asset and future contributions and benefits. The method of resolution is based on the Cox–Huang approach and on dynamic programming.

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