Extrapolative income expectations and retirement savings

Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F67985998%3A_____%2F23%3A00571063" target="_blank" >RIV/67985998:_____/23:00571063 - isvavai.cz</a>
Result on the web
<a href="https://www.cerge-ei.cz/pdf/wp/Wp751.pdf" target="_blank" >https://www.cerge-ei.cz/pdf/wp/Wp751.pdf</a>
DOI - Digital Object Identifier
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Result language
angličtina
Original language name
Extrapolative income expectations and retirement savings
Original language description
Why do employees’ retirement contributions gradually increase throughout their careers? This paper uses a structural life-cycle model based on household expectations data to explain workers’ retirement contribution decisions. The Michigan Survey of Consumers data shows that young households extrapolate from their recent income realizations and overstate the persistence and volatility of their future income. The structural life-cycle model with extrapolative expectations quantifies the difference in retirement contribution rates compared to rational expectations. Contrary to rational workers, extrapolative workers’ contributions match the data on retirement contributions over the life cycle. Consequently, mandating automatic enrollment yields negligible effects on retirement savings.
Czech name
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Czech description
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Project
<a href="/en/project/LX22NPO5101" target="_blank" >LX22NPO5101: The National Institute for Research on the Socioeconomic Impact of Diseases and Systemic Risks</a><br>
Continuities
I - Institucionalni podpora na dlouhodoby koncepcni rozvoj vyzkumne organizace

Publication year
2023
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

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