Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/185222 
Year of Publication: 
2018
Series/Report no.: 
IZA Discussion Papers No. 11762
Publisher: 
Institute of Labor Economics (IZA), Bonn
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 percent.
Subjects: 
household finance
retirement savings
exponential-growth bias
quasi-hyperbolic discounting
present bias
financial literacy
survey-based elicitations
JEL: 
D91
J26
D14
D15
Document Type: 
Working Paper

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