We report on an experiment examining why default options impact behavior. By randomly assigning employees to different varieties of a salary-linked savings account, we find that default enrollment increases participation by 40 percentage points — an effect equivalent to providing a 50% matching incentive. We then use a series of experimental interventions to differentiate between explanations for the default effect, which we conclude is driven largely by present-biased preferences and the cognitive cost of thinking through different savings scenarios. Default assignment also changes employees’ saving habits, and makes them more likely to actively decide to save after the study concludes.
Joshua Blumenstock, Michael Callen, Tarek Ghani
Financial services for the poor, Technology for development
- Blumenstock, JE, Callen, M, and Ghani, T (2018). Why Do Defaults Affect Behavior? Experimental Evidence from Afghanistan, American Economic Review, 108 (10), 2868-2901 [pdf]
- Blumenstock, JE, Callen, MC, Ghani, T, Koepke, L (2015). Promises and Pitfalls of Mobile Money in Afghanistan: Evidence from a Randomized Control Trial
Innovations for Poverty Action
Bill and Melinda Gates Foundation