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Participation and Investment Decisions in a Retirement Plan: The Influence of Colleagues' Choices

32 Pages Posted: 12 Jun 2000 Last revised: 18 Oct 2010

Esther Duflo

Massachusetts Institute of Technology (MIT) - Department of Economics; Abdul Latif Jameel Poverty Action Lab (J-PAL); National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); Bureau for Research and Economic Analysis of Development (BREAD)

Emmanuel Saez

University of California, Berkeley - Department of Economics; National Bureau of Economic Research (NBER)

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Date Written: June 2000

Abstract

This paper investigates whether peer effects play an important role in retirement savings decisions. We use individual data from the staff of a university to study whether individual decisions to enroll in a Tax Deferred Account plan sponsored by the university (and the choice of the mutual fund vendor for people who choose to enroll) are affected by the decisions of other employees in the same department. To overcome the identification problems, we separate the departments into sub-groups (along gender, status, age, and tenure lines) and we instrument the average participation of each peer group by the salary or tenure structure in this group. Our results suggest that peer effects are important. We find significant own-group peer effect on participation and on vendor's choice, but no cross-group peer effects.

Suggested Citation

Duflo, Esther and Saez, Emmanuel, Participation and Investment Decisions in a Retirement Plan: The Influence of Colleagues' Choices (June 2000). NBER Working Paper No. w7735. Available at SSRN: https://ssrn.com/abstract=232118

Esther Duflo (Contact Author)

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

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Abdul Latif Jameel Poverty Action Lab (J-PAL) ( email )

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National Bureau of Economic Research (NBER)

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Centre for Economic Policy Research (CEPR)

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Bureau for Research and Economic Analysis of Development (BREAD) ( email )

Duke University
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Emmanuel Saez

University of California, Berkeley - Department of Economics ( email )

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Berkeley, CA 94720-3880
United States
510-642-4631 (Phone)
510-642-6615 (Fax)

National Bureau of Economic Research (NBER)

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