《《duflo participation and investment decision in a retired》.pdf

Journal of Public Economics 85 (2002) 121–148 /locate/econbase Participation and investment decisions in a retirement plan: the influence of colleagues’ choices Esther Dufloa,b , *, Emmanuel Saezb,c aMIT, Department of Economics E52-252g, 50 Memorial Drive, Cambridge, MA 02142, USA bNBER, 1050 Massachusetts Avenue, Cambridge, MA 02138, USA cHarvard University, Department of Economics, Littauer Center, Cambridge, MA 02138, USA Received 29 May 2000; received in revised form 18 December 2000; accepted 22 January 2001 Abstract This paper investigates whether peer effects play an important role in retirement savings decisions. We use individual data from employees of a large 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 divide 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 may be an important determinant of savings decisions.  2002 Elsevier Science B.V. All rights reserved. Keywords : Peer effects; Retirement saving plans JEL classification : D83; I22 1. Introduction Low levels of savings in the United States have generated substantial interest in the question of what determines savings decisions. A vast literature has studied the *Corresponding author. MIT, Department of Economics E52-252g, 50 Memorial Dr