Predicting Retirement Savings Using Survey Measures of Exponential‐Growth Bias and Present Bias

23 Pages Posted: 22 May 2019

See all articles by Gopi Shah Goda

Gopi Shah Goda

Stanford University

Matthew Levy

London School of Economics & Political Science (LSE) - Department of Economics

Colleen Flaherty Manchester

affiliation not provided to SSRN

Aaron Sojourner

University of Minnesota; IZA Institute of Labor Economics

Joshua Tasoff

Claremont Colleges - Claremont Graduate University

Multiple version iconThere are 2 versions of this paper

Date Written: July 2019

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%.

JEL Classification: D91, D14

Suggested Citation

Goda, Gopi Shah and Levy, Matthew and Flaherty Manchester, Colleen and Sojourner, Aaron J. and Tasoff, Joshua, Predicting Retirement Savings Using Survey Measures of Exponential‐Growth Bias and Present Bias (July 2019). Economic Inquiry, Vol. 57, Issue 3, pp. 1636-1658, 2019. Available at SSRN: https://ssrn.com/abstract=3392594 or http://dx.doi.org/10.1111/ecin.12792

Gopi Shah Goda (Contact Author)

Stanford University ( email )

SIEPR
366 Galvez St.
Stanford, CA 94305
United States
6507360480 (Phone)

Matthew Levy

London School of Economics & Political Science (LSE) - Department of Economics ( email )

Houghton Street
London WC2A 2AE
United Kingdom

Colleen Flaherty Manchester

affiliation not provided to SSRN

No Address Available

Aaron J. Sojourner

University of Minnesota ( email )

Carlson School of Management
321 19th Ave S, 3-300
Minneapolis, MN 55455
United States
6126249521 (Phone)

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Joshua Tasoff

Claremont Colleges - Claremont Graduate University ( email )

150 E. Tenth Street
Claremont, CA 91711
United States

HOME PAGE: http://sites.cgu.edu/tasoffj/

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