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Lecture 8: Pension - Coggle Diagram

- - - - Evidence Madrian & Shea (2001)
        
        Fortune 500 comapny, all employees auro-enrolled.
        
        Participation jumped from 37% to 86%
        
        Defaul inertia
      - Global evidence: "save more tomorrow" (Thaler & Benarzi 2004)
        
        workers pre-commit to raise their savings rate with each future pay raise.
        Results:
        
        savings rate increased 3,5% to 13,6%
        
        80% stayed in the plan
        Takeaway:
        
        Use behavioral design to align short-term impulses with long-term goals.
      - Aging challenge:
        
        Life expectency has risen.
        
        Retirement age however, has increased only slightly => people spend more years in retirement => greater fiscal preassure
        
        Normal vs effective retirement age.
        
        Normal retirement age (NRA): Age of full benefits
        
        Effective retirement age: Average actual exit age from labor market. People often retire right before NRA.
        
        Bunching at age threshold (Seibold, 2021) In german pension system:
        
        early retirement: 60
        
        Normal: 63
        
        General: 65
        Findings:
        
        large "bunching" (spikes) at these ages => people retire exactly at threshold - reference points
        
        These ages introduce kinks in lifetime income.
        Kinks: Decrease in labor supply incentives age 60, 63, increase at age 65
        
        -Incentive to move just below the threshold to not be in the higher tax region.
        Two types of discontinuities:
        
        Kink points: changes in slope (jumps in MRT)
        
        Notch points: changes in level (jumps in ATR)