“Default Options and Retirement Saving Dynamics” (Job Market Paper)
Does automatic enrollment in retirement savings plans increase lifetime wealth accumulation and welfare? I document that employees offset the short-run effect of automatic enrollment by saving less in the future. Consequently, a rich lifecycle model estimated on data from 34 U.S. 401(k) plans predicts that the long-term effect of auto-enrollment on wealth is negligible except at the bottom of the lifetime earnings distribution. The model’s predictions are supported by its out-of-sample performance in predicting behavior in 86 other 401(k) plans and nationally representative U.K. data. The observed inertia at the savings default is explained by an opt-out cost of around $250. My estimate is smaller than the thousands of dollars estimated in previous studies because, in my fully dynamic model, non-autoenrolled workers can compensate for not contributing now by contributing more later. Automatic enrollment improves social welfare if the policymaker is more patient than individuals or puts more weight on low-income individuals.
“The One Child Policy and Household Saving” with Nicolas Coeurdacier (SciencesPo) & Keyu Jin (LSE).
Revise & Resubmit Journal of the European Economics Association. [This version: December 2019]
We investigate whether the ‘one-child policy’ has contributed to the rise in China’s household saving rate and human capital in recent decades. In a life-cycle model with intergenerational transfers and human capital accumulation, fertility restrictions lower expected old-age support coming from children—inducing parents to raise saving and education investment in their offspring. Quantitatively, the policy can account for at least 30% of the rise in aggregate saving. Using the birth of twins under the policy as an empirical out-of-sample check to the theory, we find that quantitative estimates on saving and education decisions line up well with micro-data.